Question

1.

A firm's stock has 50% chance of a 13% rate of return and a  50% chance of a 20% rate of return. What is the standard deviation of return for this stock? Answer as a percent return  to the nearest hundredth of a percent as in xx.xx without entering a percent symbol.  

2.

A firm's stock has 50% chance of a 35% rate of return. a 30% chance of a 18% rate of return. and a 20% chance of a -24% rate of return. What is the expected return for this stock? Answer as a percent return  to the nearest hundredth of a percent as in xx.xx without entering a percent symbol.  For negative returns include a negative sign.

3.

How much is the present value of an annuity of $3,000 dollars per year for 16 years, at an annual interest rate of 6.3 percent?

Answer 1

1)	Standard deviation	3.50%
Working:
Expected return	=	(50%*13%)+(50%*20%)
	=	16.50%
Variance	=	(((13%-16.50%)^2)*50%)+(((20%-16.50%)^2)*50%)
	=	0.001225
Standard deviation	=	0.001225	^(1/2)
	=	3.50%
2)	Expected return	18.10%
Working:
Expected return	=	(50%*35%)+(30%*18%)+(20%*-24%)
	=	18.10%
3)	Present Value	$ 29,702.74
Working:
Present Value	=-pv(rate,nper,pmt,fv)		Where,
	$ 29,702.74			rate	=	6.30%
				nper	=	16
				pmt	=	$ 3,000.00
				fv	=	0