ie is i ted that a dividend of % Example 1 A share is currently selling at © 50. It is expo rea share would be paid during ihe year and the share could be sold at © 54 at the ae the year. Calculate the expected return from the share Solution period stock price _, Forecasted dividend + Forecasted end of the a Tritial investment 2454 yooaz or i2percent Alternatively, where D = Dividend. P, = End of period stock price. Po = Initial strick price. 2+ 425? <0.08+008=012 ot 12 per cent. Example 2 Calculate the expected return and the standard deviation of retums fs stock having the following probability distribution of returns. Sanee nace Tia Ot re ‘Possible returns (in per cent) Probability of occurrence B 005; “10 010 0 010 8 035 20 025 30 20 35 15ion Since alpha and beta othe stock are to be calculated, the regression g~ bbe used. ony Calculation of cand [of stock ‘ONGC returns (NSE Index return x 5 Y YR) X (Re) 075 =035 oz ae 049 024 br 3.05, -1.03 1.06, a 341 164 ee) a 913 6.67 44.49 a 236 113 128 a 042 on 052 = MEXY = (2X21) nEX? ~ (EXP? = 12x107.55) ~ (12.72%25.32) (1272.89) = (12.72) ‘= 1290.60-322.07 _ 968.53 B PIP se