=+14" (Examination level) Horace Investments Your Uncle Horace is a wealthy man with investments in a variety of businesses. He is also a generous person, especially to his nieces and nephews. He has written explain-

ing that he will be distributing some of his shareholdings amongst the next generation. To your surprise, he has offered you £100,000 of shares in two firms of great sentimental value to him; Ecaroh and Acchar. You may allocate the £100,000 in any one of four ways. The first two options are to put all of the money into one of the firms. An alternative is to allocate half to Ecaroh and half to Acehar. Finally you may have £90,000 of Ecaroh shares and £10,000 of Acehar shares. During the week you are given to make your decision you contact a friend who is a corporate analyst with access to extensive brokers' and other reports on firms. The information he pro-

vides could help you to allocate this generous gift. He tells you that the market consensus is that Ecaroh is a relatively unexciting but steady, reliable firm producing profits which do not vary in an erratic fashion. If the economy is growing strongly then the returns on Ecaroh are expected to be 10 per cent per year. If normal eco-

nomic growth occurs then the returns will be 15 per cent and if poor growth is the outcome the returns will be 16 per cent.