Question

Micro-Pub, Inc., is considering the purchase of one of two microfilm​ cameras, R and S. Both should provide benefits over a​ 10-year period, and each requires an initial investment of

​$3,000.

Management has constructed the following table of estimates of rates of return and probabilities for​ pessimistic, most​ likely, and optimistic​ results

Camera R		Camera S
	Amount	Probability	Amount		Probability
Initial investment	​$3,000	1.00	​$3,000		1.00
Annual rate of return
Pessimistic	21​%	0.21	16​%		0.23
Most likely	27​%	0.46	29​%		0.57
Optimistic	31​%	0.33	32​%		0.20

 

Which

camera purchase is​ riskier? ​ Why?

Answer 1