Question
In: Economics
A firm is considering two projects, A and B, with the following probability distributions for profit....
A firm is considering two projects, A and B, with the following probability distributions for profit.
Profit ($1,000s). Project A Probability (%) Project B Probability (%)
$20 10 10
40 15 15
60 50 25
80 15 40
100 10 10
a. Compute the expected value of project A (in $1,000s).
b. Compute the variance of project A (in $1000s).
c. Compute the expected value of project B (in $1000s).
d. Which project would be selected if an analysis of variance rule were applied?
e. Which project would a risk-neutral manager select?
f. Report the coefficients of variation (?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
(7%)
(37%)
0.2
4
0
0.2
13
19
0.3
18
27
0.1
38
48
Calculate the expected rate of return, , for Stock B ( =
11.20%.) Do not round intermediate calculations. Round your answer
to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 26.62%.) Do not round
intermediate calculations. Round your answer to...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.3
(15%)
(30%)
0.2
3
0
0.2
11
20
0.1
24
26
0.2
33
40
Calculate the expected rate of return, , for Stock B ( = 7.30%.)
Do not round intermediate calculations. Round your answer to two
decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 26.58%.) Do not round
intermediate calculations. Round your answer to...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(9
%)
(30
%)
0.2
6
0
0.5
12
22
0.1
21
26
0.1
32
47
Calculate the expected rate of return, , for Stock B
( = 11.60%.) Do not round intermediate calculations. Round your
answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 19.66%.) Do not round
intermediate calculations. Round your answer...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(7
%)
(35
%)
0.2
3
0
0.5
13
18
0.1
20
25
0.1
29
44
Calculate the expected rate of return, , for Stock B ( =
11.30%.) Do not round intermediate calculations. Round your answer
to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 19.67%.) Do not round
intermediate calculations. Round your...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(9
%)
(33
%)
0.1
5
0
0.6
12
23
0.1
20
27
0.1
38
45
Calculate the expected rate of return, , for Stock B ( =
12.60%.) Do not round intermediate calculations. Round your answer
to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 19.71%.) Do not round
intermediate calculations. Round your...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.4
(10%)
(23%)
0.2
3
0
0.1
14
22
0.1
23
25
0.2
32
46
Calculate the expected rate of return, , for Stock B
( = 6.70%.) Do not round intermediate calculations. Round your
answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 26.90%.) Do not round
intermediate calculations. Round your answer to two...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(11
%)
(39
%)
0.2
2
0
0.5
16
21
0.1
20
30
0.1
39
47
Calculate the expected rate of return, , for Stock B ( =
13.20%.) Do not round intermediate calculations. Round your answer
to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 21.89%.) Do not round
intermediate calculations. Round your...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(8
%)
(26
%)
0.1
2
0
0.6
13
24
0.1
18
29
0.1
32
40
Calculate the expected rate of return, , for Stock B ( =
12.20%.) Do not round intermediate calculations. Round your answer
to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 17.54%.) Do not round
intermediate calculations. Round your...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(6
%)
(26
%)
0.2
4
0
0.4
14
23
0.2
24
27
0.1
37
37
Calculate the expected rate of return, , for Stock B
( = 14.30%.) Do not round intermediate calculations. Round your
answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 17.76%.) Do not round
intermediate calculations. Round your answer...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(10
%)
(28
%)
0.2
5
0
0.5
16
21
0.1
22
27
0.1
38
43
Calculate the expected rate of return, , for Stock B
( = 14.00%.) Do not round intermediate calculations. Round your
answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 18.46%.) Do not round
intermediate calculations. Round your answer...
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