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Mr Shikongo, a retiree with a farm in dordabis has received N$ 1,000,000 in pensions for...

Mr Shikongo, a retiree with a farm in dordabis has received N$ 1,000,000 in pensions for his long service as a public servant. he is considering investing in farming but does not want to 'put all eggs in one basket'. Mr shikongo is therefore planning to invest in pig farming, crop farming, and floriculture. likely returns from each investment depend on the state of weather. Namibia's department of Meteorology's weather forecasts for the outlook year are uncertain and are projected as per the table below. The likely returns from each venture, also depending on state of weather, are also given in the table:

State of weather

probability of state of

weather

 pig farming crop farming floriculture
bad 20% 2% -3% -5%
good ?% 10% 7% 11%
excellent 30% 20% 15% 25%
investment (N$) N$ 300,000 N$ 250,000 N$ 450,000

Required:

a. calculate the farmer's likely return on the floriculture investment.

b. what is the risk of the pig farming project?

c. what is the farmer's likely combined return if he invests in the three farming activities as shown in the table?

d. what is the risk on the farmer's portfolio?

Solutions

Expert Solution

jeff jeffy answered 2 years ago
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