FIN 419 Week 1 Activity Latest 2016 Version

May 28th, 2016
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P 5-5 Risk and Probability 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 and each requires an initial investment of $4,000. Management has constructed the accompanying table of estimates of rates of return and probabilities for pessimistic, most likely, and optimistic results. a. Determine the range for the rate of return for each of the two cameras. b. Determine the expected value of return for each camera. c. Purchase of which camera is riskier? Why? P8-14 Portfolio analysis You have been given the expected return data shown in the first table on three assets-F, G, and H- over the period 2013-2016. Expected return Asset F 2013 16%, 2014 17% 2015 18% 2016 19%- Asset G 2013 17% 2014 16% 2015 15% 2016 14% - Asset H 2013 14% 2014 15% 2015 16% 2016 17% Using these assets, you have isolated the three investment alternatives shown in the following table. Alternative investments 1- 100% of ass

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Initial investmentAnnual rate of returnPessimisticMost likelyOptimisticCamera RAmount Prob$3,00024%29%33%Camera SAmount Prob1$3,0000.270.360.3715%25%32%10.180.530.29a.RangeRangeCamera RCamera S9%17%b.Exp return Camera RExp return Camera S29.13%25.23%YearExpected ReturnGH19%20%20%19%21%18%22%17%F2016201720182019altern 1altern 2altern 3100% F50% F50% F17%18%19%20%altern 1altern 2100%50.0%100%50.0%100%50.0%100%50.0%50% G50% Haexp retexp retexp retalt 1alt 2alt 320.50%19.50%19.50%bst devst devst devalt 1alt 2alt 31.29%01.29%cCVCVCValt 1alt 2alt 30.0630.0000.0660.19000.20000.21000.2200for exp ret0.1950.1950.1950.1950.180.190.20.210.0002252.5E-050.0000250.0002250.0005for st dev000000.0002250.0000250.0000250.0002250.0005rfrmBetaRisk free market returnBeta10%17%Required Return14.20%0.6Name: FIN 419 Week 1 Activity Latest 2016 VersionDescription:P 5-5Risk and ProbabilityMicro-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 and each requires an initial investment of $4,000. Management has constructed the accompanying table of estimates of rates of return and probabilities for pessimistic, most likely, and optimistic results.a. Determine the range for the rate of return for each of the two camera

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