325.1

1.What is the expected monthly return and standard deviation of the monthly returns for this stock? (3pts)

The expected return just equals the average of the historical returns, so

E[R] = [.04+(-.01)+.06]/3 =0.03

To get the standard deviation, we first find the variance:

We found the average return in the first part. In this formula, the R with a bar over it stands for average return. Thus, the variance is:

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