=+Acchar, a consumer electronics firm, is a much more exciting and dynamic but risky firm. Profits vary in dramatic ways with the general level of activity in the economy. If growth is strong then Acehar will return 50 per cent; if normal, 25 per cent; and, if poor, there will be no return. You generate your own estimates of the probabilities of particular economic growth rates occurring by amalgamating numerous macroeco-

nomic forecasts and applying a dose of scepticism to any one estimate. Your conclusions are that there is a 30 per cent chance of strong growth, a 40 per cent chance of normal growth and the probability of slow growth is put at 30 per cent.

Because of Horace's emotional attachment to these firms he insists that these are the only investment(s) you hold, as he puts it, to 'engender commitment and interest in the success of his corporate babies'.

Required a For each of the alternatives on offer calculate returns and standard deviation.