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What is the expected range of prices

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The following returns are predicted for ABC stock under three projected economic scenarios.

Pi = Probability of economic scenario i. Ri = Return of ABC stock in economic scenario i.

Pi Ri

Boom 0.25 12%

Normal 0.5 6%

Recession 0.25 -2%

What is the standard deviations of returns? If the returns are normally distributed, what is the expected range of returns assuming a 99% level of confidence? If the price of stock is currently $50, what is the expected range of prices using a 99% level of confidence?

Reference no: EM132494934

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