4) Ali is a manufacturer and he wants tochoose the better of two investments, X,Y and Z. Each requires an initial outlayof OR 20,000 and each has a most likelyannual rate of return of 10%.Management has made pessimistic andoptimistic estimates of the returnsassociated with each. The threeestimates for each assets, along with itsrange, is given in the following Table.Which asset do you use? Why? (writefor Most likely).Annual rate ofAssetAssetAssetreturnXZPessimistic12%11%10 %Most likely??Optimistic24%25%26%

in this we have to calculate expected return of each asset and which has more expected return will…

choose the better of two investments, X, Y and Z. Each requires an initial outlay of OR 20,000 and each has a most likely annual rate of return of 10%. Management has made pessimistic and optimistic estimates of the returns

choose the better of two investments, X, Y and Z. Each requires an initial outlay of OR 20,000 and each has a most likely annual rate of return of 10%. Management has made pessimistic and optimistic estimates of the returns

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

4) Ali is a manufacturer and he wants to
choose the better of two investments, X,
Y and Z. Each requires an initial outlay
of OR 20,000 and each has a most likely
annual rate of return of 10%.
Management has made pessimistic and
optimistic estimates of the returns
associated with each. The three
estimates for each assets, along with its
range, is given in the following Table.
Which asset do you use? Why? (write
for Most likely).
Annual rate of
Asset
Asset
Asset
return
X
Z
Pessimistic
12%
11%
10 %
Most likely
?
?
Optimistic
24%
25%
26%

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