3 Investment 1 Investment 2 4 5 Scenario Expected Value Probability Expected Value Probability 0.05 55,000 0.10 Very Optimistic 54,000 6 50,000 7 Optimistic 0.20 46,500 0.15 Most likely 8 45,000 0.40 0.70 45,500 Pessimistic 40,000 9 0.20 39,200 0.05 10 35,000 Very Pessimistic 0.05 0.10 30,300 11 12 13 a) Calculate the investments expected value, standard deviation and coefficient of variation 14 15 Investment 1 Investment 2 16 Expected value 17 Variance 18 Std deviation 19 Coefficient of variation 20 21 22 b) Explain the meaning of each of these measures 23 24 Expected value: 25 Variance: 26 Std. dev: 27 Coeff of variation: 28 29 30 31 c) Which investment would be preferred and why? 32 22