Alex, investment guru, would like to invest a small portion of his earnings in stocks of...

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Alex, investment guru, would like to invest a small portion of his earnings in stocks of one of two firms. His estimated dividends and the probabilities of their occurrence are as follows: Investment Turbo Industries Zip Ltd Probability 45% 35% 20% 10% 60% 30% Cash Flow $600 $800 $1,200 $500 $750 $1,100 REQUIRED: a) Calculate the expected cash flow (expected value) for each investment. b) Calculate the coefficient of variation for each investment. c) Of the two investments, which one is riskier (use coefficient of variation)? d) If you were risk averse, which investment would you pick and why? Alex, investment guru, would like to invest a small portion of his earnings in stocks of one of two firms. His estimated dividends and the probabilities of their occurrence are as follows: Investment Turbo Industries Zip Ltd Probability 45% 35% 20% 10% 60% 30% Cash Flow $600 $800 $1,200 $500 $750 $1,100 REQUIRED: a) Calculate the expected cash flow (expected value) for each investment. b) Calculate the coefficient of variation for each investment. c) Of the two investments, which one is riskier (use coefficient of variation)? d) If you were risk averse, which investment would you pick and why?

Answer rating: 100% (QA)

Lets break this down step by step a Calculate the expected cash flow expected value for each investm... View the full answer