Consider the following investment cash flows over a two-year life:

(a) Compute the mean and variance of PW of this project at i = 10% if
1. A1 and A2 are mutually independent.
2. A1 and A2 are partially correlated with p12 = 0.3
(b) In part (a)-(l), if random variables (A1 and A2) are normally distributed with the mean and variance as specified in the table, compute the probability that the PW will be negative. (See Appendix B.)

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Period Cash Flow Mean (u) Variance (o2) Ao $500 200 500 502 A2 502