Probability distribution to the price-rate of return

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Reference no: EM13826256

Seattle Best Company common stock is currently selling for $40 per share. Security analysts at Goldman Sachs have assigned the following probability distribution to the price of (and rate of return on) Seattle Best stock one year from now:

Price Rate of Return Probability

$35 -12.5% 0.55

$45 12.5% 0.30

$55 +37.5% 0.13

$65 +62.5% 0.02

Assuming that Seattle Best is not expected to pay any dividends during the coming year, determine the expected rate of return on Seattle Best Stock.

A. 30.00%

B. -6.25%

C. 3.00%

D. 10.05%

Reference no: EM13826256

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