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4. (15 points) A rm is choosing a new product. The following table summarizes six new potential products. (a) Considering expected return and risk, which
4. (15 points) A rm is choosing a new product. The following table summarizes six new potential products. (a) Considering expected return and risk, which products are good candidates? The rm believes it can earn 4% on a risk-free investment in government securities (labeled as Product F). (b) Which product should be selected if the rate of return has a weight of 75% and the standard deviation has a weight of 25%? How much dlifference in the weighted score is there between the best and the worst of projects 1 to 6? Product IRR Standard Deviation 1 10.4% 3.2% 2 9.8 2.3 3 6.0 1.6 4 12.1 3.6 5 12.2 8.0 6 13.8 6.5 F 4.0 0.0
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