Assume there is a 10% probability of the pipeline leaking, with an expected liability of $3.2 billion
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Question:
Assume there is a 10% probability of the pipeline leaking, with an expected liability of $3.2 billion which will be deducted from total profit. There is a 90% probability the pipeline will not leak. Determine the expected return on this investment, as well as the variance.
The firm also has an alternative investment which will yield $1.6 billion over the course of the same 15-year period, with a probability of 80%, or $1.15 billion with a probability of 20%. Calculate the expected return, as well as the variance. The risk should be expressed as the standard deviation.
Note: Total Profit for Duration = $2,013.30
Related Book For
Matching Supply with Demand An Introduction to Operations Management
ISBN: 978-0073525204
3rd edition
Authors: Gerard Cachon, Christian Terwiesch
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