Risk and Return

Problem 5.1. Calculate the return on stock X from December 31, 2021 to December 31, 2022. Assume all dividends are reinvested in the stock. Dividends and ex-dividend prices (prices after dividend payments) are as follows:

Date Price Dividend

Dec 31, 2021 42 -

Mar 31, 2022 44 1.2

Jun 30, 2022 43 1.2

Sep 30, 2022. 46. 1.2

Dec 31, 2022. 47 1.2

Problem 5.2. The probability distribution of return on a stock follows.

Probability 0.2 0.3 0.4 0.1

Return -20% 0% 20% 40%

Calculate the expected return and the standard deviation of return.

Problem 5.3. The historical annual returns of a stock are:

Year 2015 2016 2017 2018 2019 2020 2021 2022

Return -12% 3% 18% 7% 22% 8% -4% 14%

Calculate the average return and the standard deviation of return.

(please explain calculation in detail if possible)