A. Suppose an American MNC is contemplating a big construction project in the heart of the...

  

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A. Suppose an American MNC is contemplating a big construction project in the heart of the Amazon rainforest in Brazil. The MNC's expected returns from the existing domestic operations are 10% with a standard deviation of 20%. The Amazonian project promises a return of 25% with a standard deviation of 30%. They have $80 billion dollars invested in domestic operations but expect a $20 billion investment in Brazil. Assuming a correlation of -0.80 between the existing and proposed projects, compute the expected returns and the standard deviation from the combined operations. (2+3) B. As an alternative to Brazil, $20 billion can be invested in the Congo basin in a project that will provide a 35% return with a 40% standard deviation having a correlation of -0.6 with domestic operations. Again, compute the expected returns and the standard deviation from the combined operations. Should they invest in Brazil or Congo? WHY? (1+2+2) A. Suppose an American MNC is contemplating a big construction project in the heart of the Amazon rainforest in Brazil. The MNC's expected returns from the existing domestic operations are 10% with a standard deviation of 20%. The Amazonian project promises a return of 25% with a standard deviation of 30%. They have $80 billion dollars invested in domestic operations but expect a $20 billion investment in Brazil. Assuming a correlation of -0.80 between the existing and proposed projects, compute the expected returns and the standard deviation from the combined operations. (2+3) B. As an alternative to Brazil, $20 billion can be invested in the Congo basin in a project that will provide a 35% return with a 40% standard deviation having a correlation of -0.6 with domestic operations. Again, compute the expected returns and the standard deviation from the combined operations. Should they invest in Brazil or Congo? WHY? (1+2+2)

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A Calculate the Expected Returns and Standard Deviation for Combined Operations in Brazil Given information For domestic operations D Expected return ... View the full answer