Question: You have two investment portfolios with uncertain cash flows and a discount rate of 10%. State A and B will occur next period with

You have two investment portfolios with uncertain cash flows and a discount rate of ( 10 % ). State A and B will occur nex

You have two investment portfolios with uncertain cash flows and a discount rate of 10%. State A and B will occur next period with probability 0.5. Show the Expected NPV and Coefficient of Variation of: Portfolio with Investment A only. Portfolio with Investment B only. Portfolio with a 50-50 mix of A and B. Does combining these portfolios reduce risk? Investment name Raviga Bachmanity T=0 -80 -80 T-1A (P=.5) 120 150 T=1B (P=.5) 80 50

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