(1) Assume that you recently graduated with a major in finance, and you just landed a job as a financial planner with Aurigin Inc., a large financial services corporation. Your first assignment is to invest PKR 100.000 for a client. Because the funds are to be invested in a business at the end of 1 year, you have been instructed to plan for a 1-year holding period. Further, your boss has restricted you to the following investment alternatives, shown with their probabilities and associated outcomes. Aurigin's economic forecasting staff has developed probability estimates for the state of the economy, and its security analysts have developed a sophisticated computer program that was used to estimate the rate of return on each alternative under each state of the economy. Avanseon Limited is a technology and communications firm: Cyan Ltd is an investment company and AKGL Co. manufactures foam and allied products. Aurigin also maintains an index fund" which owns a Market weighted fraction of all publicly traded stocks; you can invest in that fund, and thus obtain average stock market results. Given the situation as described, answer the following questions. B) You should recognize that basing a decision solely on expected returns is appropriate only for risk-neutral individuals. Because your client, like virtually everyone, is risk-averse, the riskiness of each alternative is an important aspect of the decision. One possible measure of risk is the standard deviation of returns. Calculate this value for Avances and fill in the blank in the row for o in the table below. Returns on alternative Investments The estimated rate of return Probability T-Bills Avanceon Cyan Ltd. AKGL State of the Economy Recession KSE-100 0.1 8.00% -22.00% 28.00% 10.00% -13.00% Below average 0.2 8.00% -2% 14.70% -10% 1% Average 0.4 8.00% 20% 0.00% 7% 15% Above average 0.2 8.00% 35% -10.00% 45% 29% Boom 0.1 8.00% 50% -20.00% 30% 43% 1 ? 1.70% 13.80% 15.00% 0 0.00% ? 13.4% 18.8% 15.3 CV ? ? 1.4 1.0 Beta 0.0 1.29 -0.86 0.68 1.0