Calculate the expected return

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Reference no: EM1388999

Suppose that a security costs $3000today and pays off some amount b in one year. suppose that b is uncertain accorrding to the following table of probabilities.

B________$3000_____$3300__________$3600________$3900________$4200
Probability0.1_______0.2_____________0.3__________0.2__________0.2

a.Calculate the return (in Percent) for each value of b. (note: you may just calculate the totaal return and not worry about how this split between current yield and capital- gains yield)

B.Calculate the expected return (in Percent)

C.Calculate the standard deviation of the returnn

D. Suppose that an investor has choice between buying this security or purchasing a different secuirty that also cost $3000 today but pays off $3300 with certainty in one year. How is an investor's choice of which secuirty to purchase related to his degree of risk aversion

Reference no: EM1388999

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