Question 1

Using the table below show and explain whether the two assets A and B are ideal for Hedging

State of the world	Probability	Return A	Return B
Expansion	25%	32%	5%
Normal	50%	14%	15%
Recession	25%	4%	25%

Question 2

1. Complete the Contingency Budget for the table below
2. If risk C and F actually occurred, you would be able to tap the contingency budget for relief?
3. Should you focus on risk F and why?

file:///C:/Users/mo4623/Documents/Mark's9620Backup%2010-2-2017/Documents/risk9:20Analysis%20and%20management/contingency%20budg Risk P (Risk Probability) I (Cost Impact) Risk Contingency P * Ic A E20,000 B 4 $15,000 C .6 E10,000 D .3 E30,000 E .5 $25,000 F .8 $35,000 Total E135,000