Asset L Asset M

Asset L 1
Asset M -0.963952 1
R = {C + (Ending - Beginning)} / Begin
Cash flow Ending Beginning
Return on in 0.125 12.50% 1500 21000 20000
Return on in 0.123636 12.36% 6800 55000 55000

Keel should select for investment X.

 a Range = Max - Min A B
Range = Optimistic - Pes 8 20
b. Less Risky Riskier
c Choose
because it is less risky
d. The information of range is not enough to decide for the investment or we ha
to further calculate on the basis of SD and CV.

a. Range R 10%
S 20%
b. E(R) = Sum of (R x P)
R Prob. weighted S Prob. weighted value
pessimistic 20 0.25 5 15 0.2 3
most likely 25 0.5 12.5 25 0.55 13.75
Optimistic 30 0.25 7.5 35 0.25 8.75
Expected Return 25 25.5

c. Purchase of Camera S is Riskier

Alternative Exp. Return SD CV = SD/E(R)

A 20 7 0.35
B 22 9.5 0.431818
C 19 6 0.315789
D 16 5.5 0.34375
Weights Year Asset L Asset M a) expecteRp - E(Rp) Sq(Rp - E(Rp))
L 0.4 2004 14 20 17.6 2.13 4.5369
M 0.6 2005 14 18 16.4 0.93 0.8649
2006 16 16 16 0.53 0.2809
2007 17 14 15.2 -0.27 0.0729
2008 17 12 14 -1.47 2.1609
2009 19 10 13.6 -1.87 3.4969
total= 92.8
b. E(Rp) sum of retur 15.46667 11.4134
2.28268

c. SDrp 1.51085406
a. Expected Return
Alternative A Alternativ Alternative C (.5*F +.5H)
Year Asset F Asset G Asset H Portolio R Portolio Return of FH
2004 16 17 14 16.5 15
2005 17 16 15 16.5 16
2006 18 15 16 16.5 17
2007 19 14 17 16.5 18
70 66 66
Expected Return = 17.5 16.5 16.5

b Standard Deviation A Ra-E(R)a Sq B Rb-E(R)b Sq C

16 -1.5 2.25 16.5 0 0 15
17 -0.5 0.25 16.5 0 0 16
18 0.5 0.25 16.5 0 0 17
19 1.5 2.25 16.5 0 0 18
5 0
1.666667 0
SD 1.290994 0

c. CV A 0.073771
B 0
C 0.078242

d. The calculations indicate that the CV of Alternative B is the least infact it is zero indicating no risk at all.
So as per calculations Aternative B is recommended
ning)} / Beginning
Beginning
the investment or we have
weighted value
 Rc-E(R)c Sq
-1.5 2.25
-0.5 0.25
0.5 0.25
1.5 2.25
5
1.666667
1.290994

no risk at all.