possibilities probability payoff Payoff x probability
1 .3 Rs 350 Rs 105
2 .6 Rs 250 Rs 150
3 .1 Rs 150 Rs 15
Rs 270
Expected value= Sum of probability time payoff=Rs 270
Variance;
(350 x .3)+(250 x .6) x .1
305-270=80
250-270=20
150-270=-120
80^ 2=6400
(-120)^2=400
(-120)^2=1400
.3*(6400) +.6*400)+.1*(1400)
So Variance=3600
Standard Deviation
It is square rate of Variance. It can be calculated as.
√ 3600=Rs60
Solution:2
Po=D1/(-g)
Where Po is the current price.
D1 is the next dividend Witch would be D0*(1*g whereD0 is least dividend.
R is required rate of return and g is growth
Po=Rs.4*(1+0.08)/(0.18*0.08)
Po= Rs 43.20