3. You are considering investing in one of two projects, which have the following returns and probabilities of occurrence: Probability 0.10 0.20 0.25 0.30 0.10 0.05 Project A -20% 0 10% 15% 20% 40% Return on Investment Project B -35% -10% 15% 25% 40% 50% (a) Compute the mean return (Expected value) for each project. (b) Compute the variance of return for each project. (c) If risk is not a concern which project would you prefer? (d) What is the probability that your preferred project (Problem 3.c) is less profitable than the non-preferred one (For example if you chose projA in problem 3.c, what is the probability that Proj.B is more profitable than Proj.A or vice versa)
3. You are considering investing in one of two projects, which have the following returns and probabilities of occurrence: Probability 0.10 0.20 0.25 0.30 0.10 0.05 Project A -20% 0 10% 15% 20% 40% Return on Investment Project B -35% -10% 15% 25% 40% 50% (a) Compute the mean return (Expected value) for each project. (b) Compute the variance of return for each project. (c) If risk is not a concern which project would you prefer? (d) What is the probability that your preferred project (Problem 3.c) is less profitable than the non-preferred one (For example if you chose projA in problem 3.c, what is the probability that Proj.B is more profitable than Proj.A or vice versa)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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Transcribed Image Text:3. You are considering investing in one of two projects, which have the following returns and
probabilities of occurrence:
Probability
0.10
0.20
0.25
0.30
0.10
0.05
Project A
-20%
0
10%
15%
20%
40%
Return on Investment
Project B
-35%
-10%
15%
25%
40%
50%
(a) Compute the mean return (Expected value) for each project.
(b) Compute the variance of return for each project.
(c) If risk is not a concern which project would you prefer?
(d) What is the probability that your preferred project (Problem 3.c) is less profitable than the
non-preferred one ( For example if you chose projA in problem 3.c, what is the
probability that Proj.B is more profitable than Proj.A or vice versa)
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