Management has constructed the below table of estimates reflecting the possible returns and probabilities for pessimistic, most likely and optimistic results. Possible outcomes probability return(n$) Pessimistic 0.4 14.00 Most likely 0.2 34.00 Optimistic 0.4 6.00 a) Determine the expected value of return for the above company b) What is the risk involved if the company chooses to invest in the above opportunity?
Management has constructed the below table of estimates reflecting the possible returns and probabilities for pessimistic, most likely and optimistic results. Possible outcomes probability return(n$) Pessimistic 0.4 14.00 Most likely 0.2 34.00 Optimistic 0.4 6.00 a) Determine the expected value of return for the above company b) What is the risk involved if the company chooses to invest in the above opportunity?
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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Management has constructed the below table of estimates reflecting the possible returns and probabilities for pessimistic, most likely and optimistic results.
Possible outcomes probability return(n$)
Pessimistic 0.4 14.00
Most likely 0.2 34.00
Optimistic 0.4 6.00
a) Determine the expected value of return for the above company
b) What is the risk involved if the company chooses to invest in the above opportunity?
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