Question 1. The executor of your fathers Will has offered you the following options i. GH 50 million now ii. GH 120 million in 8 years time iii. GH 10 million at the end of each year for the next 8 years iv. GH 5 million forever v. GH 10 million at the beginning of each year for the next 8 years. If the existing discount rate is 10% which of the options will you accept.

Question 1a. Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Allos Inc. are expected to follow the economy closely. The return predictions are as follows: States of the economy Allos Inc. Returns () Depression -20% Recession 10% Normal 30% Boom 50% You are required to calculate: i. the expected returns [3 marks] ii. the Variance [3 marks] iii. the Standard deviation [3 marks] b. Suppose you invest 60% of your portfolio in Exxon Mobil and 40% in Coca Cola. The expected dollar return on your Exxon Mobil stock is 10% and on Coca Cola is 15%. The standard deviation of their annualized daily returns are 18.2% and 27.3%, respectively. Assume a correlation coefficient of 1.0. You are required to calculate: i. the portfolio expected returns [2 marks] ii. the portfolio variance [2 marks] iii. the portfolio standard deviation