P8–6 Bar charts and risk Swan’s Sportswear is considering bringing out a line of designer jeans. Currently, it is negotiating with two different well-known designers. Because of the highly competitive nature of the industry, the two lines of jeans have been given code names. After market research, the firm has established the expectations shown in the following table about the annual rates of return.

Use the table to:

a. Construct a bar chart for each line’s annual rate of return.

b. Calculate the expected value of return for each line.

c. Evaluate the relative riskiness for each jean line’s rate of return using the bar charts.

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Annual rate of return Market acceptance Probability Line J Line K Very poor 0.05 0.0075 0.010 Poor 0.15 0.0125 0.025 Average 0.60 0.0850 0.080 Good 0.15 0.1475 0.135 Excellent 0.05 0.1625 0.150