Mrs. Yang is considering buying a share of stock in a firm

1. Mrs. Yang is considering buying a share of stock in a firm that has the following two possible payoffs with the corresponding probability of occurring. The stock has a purchase price of Php 7.50. You forecast that there is a 30% chance that the stock will sell for Php 15.00 at the end of one year. The alternative expectation is that there is a 70% chance that the stock will sell for Php 5.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance?

2. Mr. Lee is considering buying a share of stock in a firm that has the following two possible payoffs with the corresponding probability of occurring. The stock has a purchase price of Php 25.00. You forecast that there is a 40% chance that the stock will sell for Php 35.00 at the end of one year. The alternative expectation is that there is a 60% chance that the stock will sell for Php 15.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance?

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