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lakara, he wants to buy Cassavà Plants. He has done sev arrowed his choices to two, namely, Cassava Plant (X), and Cassava Plant (Y) with the follow nformation. dgid diw goln noiteoitianavib bns ooianenze zesizud ol os oulav bs ebird keniud ais-igirl ,Isvol noitastzine doi dgid ot zbsol mamqolovob Cassava Plant (Y) dai vhuta a 30% 20% State of Economy Cassava Plant (X) Probability Boom mng o to no 35% atniniavl 40% no 40% Good 30% 150/% 15% 15%

lakara, he wants to buy Cassavà Plants. He has done sev arrowed his choices to two, namely, Cassava Plant (X), and Cassava Plant (Y) with the follow nformation. dgid diw goln noiteoitianavib bns ooianenze zesizud ol os oulav bs ebird keniud ais-igirl ,Isvol noitastzine doi dgid ot zbsol mamqolovob Cassava Plant (Y) dai vhuta a 30% 20% State of Economy Cassava Plant (X) Probability Boom mng o to no 35% atniniavl 40% no 40% Good 30% 150/% 15% 15%

Essentials Of Investments
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
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**Makara's Decision on Cassava Plants** Makara is considering purchasing Cassava Plants and has performed extensive research to evaluate his options. He has narrowed his choices down to two: Cassava Plant (X) and Cassava Plant (Y). The following table summarizes the probabilities and returns associated with different states of the economy for both plants. | State of Economy | Probability | Cassava Plant (X) | Cassava Plant (Y) | |------------------|-------------|-------------------|-------------------| | Boom | 35% | 40% | 30% | | Good | 40% | 30% | 20% | | Poor | 15% | -15% | -15% | | Bust | 10% | -15% | -10% | ### Questions to Consider: A. **Which Cassava Plant does Makara decide to buy?** B. **What is the Correlation for X and Y Corr (X, Y)?** --- #### Explanation of the Table: The table presents four states of the economy: Boom, Good, Poor, and Bust. Each state is associated with a certain probability and expected returns for Cassava Plant (X) and Cassava Plant (Y). 1. **Boom** - Probability: 35% - Cassava Plant (X) Return: 40% - Cassava Plant (Y) Return: 30% 2. **Good** - Probability: 40% - Cassava Plant (X) Return: 30% - Cassava Plant (Y) Return: 20% 3. **Poor** - Probability: 15% - Cassava Plant (X) Return: -15% - Cassava Plant (Y) Return: -15% 4. **Bust** - Probability: 10% - Cassava Plant (X) Return: -15% - Cassava Plant (Y) Return: -10% These values can help determine the expected return and risk for each plant under different economic scenarios. By calculating the expected returns and understanding the risks through further analysis such as correlation, Makara can make a more informed decision on which Cassava Plant to invest in.
Transcribed Image Text:**Makara's Decision on Cassava Plants** Makara is considering purchasing Cassava Plants and has performed extensive research to evaluate his options. He has narrowed his choices down to two: Cassava Plant (X) and Cassava Plant (Y). The following table summarizes the probabilities and returns associated with different states of the economy for both plants. | State of Economy | Probability | Cassava Plant (X) | Cassava Plant (Y) | |------------------|-------------|-------------------|-------------------| | Boom | 35% | 40% | 30% | | Good | 40% | 30% | 20% | | Poor | 15% | -15% | -15% | | Bust | 10% | -15% | -10% | ### Questions to Consider: A. **Which Cassava Plant does Makara decide to buy?** B. **What is the Correlation for X and Y Corr (X, Y)?** --- #### Explanation of the Table: The table presents four states of the economy: Boom, Good, Poor, and Bust. Each state is associated with a certain probability and expected returns for Cassava Plant (X) and Cassava Plant (Y). 1. **Boom** - Probability: 35% - Cassava Plant (X) Return: 40% - Cassava Plant (Y) Return: 30% 2. **Good** - Probability: 40% - Cassava Plant (X) Return: 30% - Cassava Plant (Y) Return: 20% 3. **Poor** - Probability: 15% - Cassava Plant (X) Return: -15% - Cassava Plant (Y) Return: -15% 4. **Bust** - Probability: 10% - Cassava Plant (X) Return: -15% - Cassava Plant (Y) Return: -10% These values can help determine the expected return and risk for each plant under different economic scenarios. By calculating the expected returns and understanding the risks through further analysis such as correlation, Makara can make a more informed decision on which Cassava Plant to invest in.
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