9 2) a) In what respect the uncertainty is different from risk.b) Let us assume that an investment project may generate thefollowing alternative returns next year depending on the states of theeconomyState of Economy ExpectedBad- 10%Expected ReturnReturnMediocre5%Mildly Goodyex snimu 20%50 12um 29140%Probability0.20.4Sonorid0.40.2noo10)Very GoodGiven this; what may be the expected return and the risk (variancethat investment next year

Deviation from the Expected outcome is a Risk. The higher the deviations, the Higher would be the…

b) Let us assume that an investment project may generate the following alternative returns next year depending on the states of t economy State of Economy Bad Mediocre Expected Return - 10% 5% Probability 0.2 0.4

b) Let us assume that an investment project may generate the following alternative returns next year depending on the states of t economy State of Economy Bad Mediocre Expected Return - 10% 5% Probability 0.2 0.4

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

2) a) In what respect the uncertainty is different from risk.
b) Let us assume that an investment project may generate the
following alternative returns next year depending on the states of the
economy
State of Economy Expected
Bad
- 10%
Expected Return
Return
Mediocre
5%
Mildly Goodyex snimu 20%
50 12um 291
40%
Probability
0.2
0.4
Sonorid
0.4
0.2
noo
10)
Very Good
Given this; what may be the expected return and the risk (variance
that investment next year

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