Math Assignment -2: Return & Risk 1) Suppose that a particular investment has the following probability distribution:

25% chance of 10% returns 50% chance of 15% returns 25% chance of 20% returns What is expected return? 2) Find the expected Return of following two companies separately ABC & XYZ Company:

Probability 10% 15% 50% 15% 10%

Potential Returns ABC XYZ -12% -24% -5% -10% 2% 4% 9% 18% 16% 32%
Probability of state i (Pi)
.25 .50 .25

3) Find Expected Return and Risk:

State of Economy
+1% change in GNP +2% change in GNP +3% change in GNP

Return in state i (Ri)

-5% 15% 35%
Return on Asset B -0.5 .20

4) Find the Expected Return on following two Stocks: State of The Probability of State Return on Asset A Economy Boom 0.40 30% Bust 60% -10% 5) Calculate the standard deviation of returns on stock E.
STATE OF ECONOMY Probability RETURN ON STOCK E

a. Bear b. Normal c. Bull

70% 30% 10%

14 % 10.50 % 08 %

6) Calculate the risk of the following Stock: P0 State of Economy Probability Optimistic 40% 100 Tk Average 35% Pessimistic 25%

P1 Tk 120 Tk 110 Tk 70

Dividend 20 10