XYZ ltd. is considering three possible capital projects for next year. Each project has a 1 year life, and project retur
Posted: Sat Feb 19, 2022 2:41 pm
XYZ ltd. is considering three possible capital projects for next
year. Each project has a 1 year life, and project returns depend on
next years state of the economy. The estimated rates of return are
shown below.
STATE OF THE
PROBABILITY
RATE OF RETURN
ECONOMY
OF OCCURRENCE
A
B
C
Recession
0.25
10% 9%
14%
Average
0.50
14
13
12
BOOM
0.25
16
18
10
REQUIRED: Compute the standard deviation of the portfolio
year. Each project has a 1 year life, and project returns depend on
next years state of the economy. The estimated rates of return are
shown below.
STATE OF THE
PROBABILITY
RATE OF RETURN
ECONOMY
OF OCCURRENCE
A
B
C
Recession
0.25
10% 9%
14%
Average
0.50
14
13
12
BOOM
0.25
16
18
10
REQUIRED: Compute the standard deviation of the portfolio