Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following probability distribution of returns estimated for a proposed project that involves a new ultrasound machine: Rate of Return State of the Economy

image text in transcribed
Consider the following probability distribution of returns estimated for a proposed project that involves a new ultrasound machine: Rate of Return State of the Economy Probability of Occurrence Very poor Poor Average Good Very good 0.10 0.20 0.40 0.20 0.10 10.0% 2.0% 14.0% 22.0% 34.0% a. What is the expected rate of return on the project? .10x (-10%) + .20 x (096) + .40 x (10%) + .20 x (20%) + .10 x (30%) b. What is the project's standard deviation of returns? 2.80% c. What is the project's coefficient of variation (CV) of returns? 10% d. What type of risk do the standard deviation and CV measure? e. In what situation is this risk relevant

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Nasdaq And Us30 Ultimate Day Trading Strategy

Authors: James Jecool King

1st Edition

979-8367719499

More Books

Students also viewed these Finance questions