Risk and probability Micro-Pub, Inc., is considering the purchase of one of two digital cameras, R and S, each of which requires an initial investment of $4,000. Management has constructed the following table of estimates of rates of return and probabilities for pessimistic, most likely, and optimistic results: a. Determine the range for the rate of return for each of the two cameras. b. Determine the value of the expected return for each camera. c. Which camera purchase is riskier? Why? a. The range for the rate of return for camera R is %. (Round to the nearest whole number.) The range for the rate of return for camera S is %. (Round to the nearest whole number.) b. The value of the expected return for camera R is %. (Round to two decimal places.) %. (Round to two decimal places.) The value of the expected return for camera S is c. Which camera purchase is riskier? Why? (Select from the drop-down menus.) The purchase of is riskier because it has a Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment Amount $4,000 Camera R Probability Camera S Amount 1.00 $4,000 Probability 1.00 range for the rate of return. Annual rate of return Pessimistic 18% 0.22 23% 0.25 Most likely 27% 0.35 26% 0.51 Optimistic 35% 0.43 30% 0.24 Print Done Risk and probability Micro-Pub, Inc., is considering the purchase of one of two digital cameras, R and S, each of which requires an initial investment of $4,000. Management has constructed the following table of estimates of rates of return and probabilities for pessimistic, most likely, and optimistic results: a. Determine the range for the rate of return for each of the two cameras. b. Determine the value of the expected return for each camera. c. Which camera purchase is riskier? Why? a. The range for the rate of return for camera R is %. (Round to the nearest whole number.) The range for the rate of return for camera S is %. (Round to the nearest whole number.) b. The value of the expected return for camera R is %. (Round to two decimal places.) %. (Round to two decimal places.) The value of the expected return for camera S is c. Which camera purchase is riskier? Why? (Select from the drop-down menus.) The purchase of is riskier because it has a Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment Amount $4,000 Camera R Probability Camera S Amount 1.00 $4,000 Probability 1.00 range for the rate of return. Annual rate of return Pessimistic 18% 0.22 23% 0.25 Most likely 27% 0.35 26% 0.51 Optimistic 35% 0.43 30% 0.24 Print Done