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You are interested in buying a stock that has a price of $22. You have projected that next year there is: a 10% probability the stock will equal $1, a 20% probability the stock will equal $18, a 30% probability the stock will equal $23, a 30% probability the stock will equal $30, and a 10% probability the stock will equal $50. Answer the following (showing all work):

(a) what is the expected return on the stock if you buy today and sell next year?

(b) what is the expected standard deviation of the stock?

Basic Finance, Finance

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