1a. Suppose CVS stock has a +40% return with probability 1/4 and a -10% return otherwise. What are the expected return and volatility (standard deviation) of its return?

1b. Over the last four weeks, the stock price has closed at $60.00, $55.00, $58.50, and $57.085, respectively. Based on these prices, what is the expected return and standard deviation of this stock? Assume that they have paid a dividend of 2$ at the end of the second, third and fourth week. Do you think this expected return is representative?

1c. Your broker Sam calls up and asks you to consider three stocks that he thinks are just dynamite.

Stock 1 has an expected return of 5% and a standard deviation of 3%

Stock 2 has an expected return of 10% and a standard deviation of 5%

Stock 3 has an expected return of 8% and a standard deviation of 8%

Which (if any) of the three stocks above is dominated by another? Explain your answer. Also, give an example of a stock that dominates stocks 1, 2, and 3.