5. Suppose you have three states of the economy with probabilities and returns as follows: State of the economy Probabil

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5 Suppose You Have Three States Of The Economy With Probabilities And Returns As Follows State Of The Economy Probabil 1 (27.91 KiB) Viewed 33 times

5. Suppose you have three states of the economy with probabilities and returns as follows: State of the economy Probability Return Expansion 20% 33% Regular 50% 8% Recession 30% -6% Calculate the expected return and variance and standard deviation of returns. 6. Dell is faced with two independent investment opportunities. The company has an investment policy which requires acceptable projects to recover all costs within 3 years. The company uses the discounted payback method to assess potential projects and utilizes a discount rate of 11 percent. The cash flows for the two projects are: Year Project X Project Y 0 -100,000 -75,000 1 50,000 50,000 2 40,000 30,000 3 30,000 20,000 4 30,000 O Which investment project should Dell go for?