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the correct answer is $7,823.55. Can anyone show me the working to get the answer? An investment opportunity exists where the initial investment is made
the correct answer is $7,823.55. Can anyone show me the working to get the answer?
An investment opportunity exists where the initial investment is made today and all the proceeds are received two years later. After due analysis, you conclude that the annual return of the investment in the first year is normally distributed with mean 4% and standard deviation 5%. The annual return in the second year is also normally distributed, but with a mean of 6% and a standard deviation of 3%. The risk free rate is 3% per year for both years. The investment must be paid for in cash today. a) What is the expected net present value of a $200,000 investment, ignoring any risk aversion? [4 Marks]Step by Step Solution
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