1 Consider the following probability distribution of returns estimated for a proposed project that involves a new ultrasound machine:

a. What is the expected rate of return on the project?

b. What is the projects standard deviation of returns?

c. What is the projects coefficient of variation (CV) of returns?

d. What type of risk do the standard deviation and CV measure?

e. In what situation is this risk relevant

State of Economy Prob of Occurrence Rate of Return

Very Poor 0.10 -10%

Poor 0.20 0

Avg 0.40 10

Good 0.20 20

Very Good 0.10 30