10.1

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

State of the Economy	Probability of Occurrence	Rate of Return
Very poor	.10	-10.0%
Poor	.20	0.0
Average	.40	10.0
Good	.20	20.0
Very good	.10	30.0

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

b. what is the project's standard deviation of returns?

c. What is the project's 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?

Show equations used if applicable.