Stock return r_stock is either +2500% or -100% with equal probabilities. Find:

E[r_stock] =

Var[r_stock] =

std_stock=

Is such stock attractive? Would you like to invest everything in this stock?

What is the probability to survive after 2 periods of investing ALL your wealth into it?

How should one approach instruments like that?

Answer rating: 100% (QA)

To calculate the expected return variance and standard deviation of the stock we can use the given probabilities and returns Lets denote Prstock 2500 05 probability of a positive return Prstock 100 05 ... View the full answer