QUESTION 2 [25 MARKS] Perfect Tyre Suppliers is a newly formed focally owned company seeing to anter the motor acoessory markets whate it will nupply two types of fyres namely: Michalin and Tomade. The demand for tyres will fluctuate deponding on the state of the economy, It will empioy 20 employees at its manufacturing piant perfoming diflerent functions. The Managing Director recently attended an intemational contarence on risk managemert. During the conference it was stated how the statistical concept of standard deviation can be used to mensure nisk. He has therefore contracted you as the managament accountart with the aim of exploring how the use of itandard deviation can heip him make decisions pertaining to the risk profle of each tyre type: The following probability distribution has been provided by the managing direcior based on his induntry experience The expected return for the Michelin tyre is 15% during auper boom, 25% in a boom eoonomy and 10% in a recession. The fornado tyre has an expected retum of 20% in a super boom economy, 10% in a boom economy and 15% during recession. In order to ensure that the above probability distntution is as close an aceurate or perfect, the Managing Director is thinking of hiring a market specialiat to provide further information an the mariet of tyres. The markat speciaint wil charge 2% higher compared to the cost incurred by Ferfect Tyres to obtain the current projection QUESTION 2 [25 MARKS] Perfect Tyre Suppliers is a newly formed focally owned company seeing to anter the motor acoessory markets whate it will nupply two types of fyres namely: Michalin and Tomade. The demand for tyres will fluctuate deponding on the state of the economy, It will empioy 20 employees at its manufacturing piant perfoming diflerent functions. The Managing Director recently attended an intemational contarence on risk managemert. During the conference it was stated how the statistical concept of standard deviation can be used to mensure nisk. He has therefore contracted you as the managament accountart with the aim of exploring how the use of itandard deviation can heip him make decisions pertaining to the risk profle of each tyre type: The following probability distribution has been provided by the managing direcior based on his induntry experience The expected return for the Michelin tyre is 15% during auper boom, 25% in a boom eoonomy and 10% in a recession. The fornado tyre has an expected retum of 20% in a super boom economy, 10% in a boom economy and 15% during recession. In order to ensure that the above probability distntution is as close an aceurate or perfect, the Managing Director is thinking of hiring a market specialiat to provide further information an the mariet of tyres. The markat speciaint wil charge 2% higher compared to the cost incurred by Ferfect Tyres to obtain the current projection