A project with an initial outlay of 1m has a 0.2 probability of producing a return of

Question:

A project with an initial outlay of £1m has a 0.2 probability of producing a return of £800,000 in Year 1 and a 0.8 probability of delivering a return of £500,000 in Year 1. If the £800,000 result occurs then the second year could return either £700,000 (probability of 0.5) or £300,000 (probability of 0.5). If the £500,000 result for Year 1 occurs then either £600,000 (probability 0.7) or £400,000 (probability 0.3) could be received in the second year. All cash flows occur on anniversary dates. The is 12 per cent.
Calculate the and standard deviation.
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...