xyz has been sue for patent infringement. the common stock which currently sells

Question

xyz has been sue for patent infringement. the common stock which currently sells for 0.50/share will rise to $3, or will become worthless, depending on the outcome os the trial. if you believe that there is a 50-50 chance of bankruptcy, what is the expected price/share?

$1.5 , 2.5, 1.4, 2, 3 ?

what is the expected profit per share ? $4,8,9,1.00, 1.50

what s the expected rate of return ? 33.33 % 150% 250% 200% 400%

what is the probability that you will loose your entire investment ? zero, 10% 15% 40% 50%

Explanation / Answer

A) Expected price = (3 * .50 ) +(0*.50)

                          = 1.5 + 0

                          = $ 1.5 per share

correct option is "E"

2)Expected rate of return   [P1-P0]/P0

                               = [1.5 - .50 ] /.50

                               = 1 / .50

                                = 2 or 200%

correct option is "D"

c) correct option is "E" - 50%

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