Question

Risk and probability Micro-Pub, Inc., is considering the purchase of one of two microfilm cameras, R and S. Both should provide benefits over a 10-year period, and each requires an initial investment of $5,000. Management has constructed the following table of estimates of rates of return and probabilities for pessimistic, most likely, and optimistic results: a. Determine the range for the rate of return for each of the two cameras. b. Determine the value of the expected return for each camera. c. Which camera purchase is riskier? Why? a. The range for the rate of return for camera R is %. (Round to the nearest whole number.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Camera R Amount Probability $5,000 1.00 Camera S Amount Probability $5,000 1.00 Initial investment Annual rate of return Pessimistic Most likely Optimistic 0.23 20% 25% 34% 0.23 0.36 0.41 16% 27% 33% 0.57 0.20 Print Done

Answer 1

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- 2x B 7.Formational airport to the Insert Delete Format 2 clear open source s 39 40 STATS - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General Ea Copy Fill Paste BI U D- DA E E E s FMerce Merge & Center - Center $ % % Format Painter , 4.0 .00 :.: Conditional Format Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing 153 А в H Formula Bar 38 ANNUAL RATE OF RETURN ANNUAL RATE OF RETURN B (AXB) EXPECTED B (AXB) EXPECTED PROB RETURN PROB RETURN 41 PESSIMISTIC 0.23 4.6 PESSIMISTIC 16 0.23 3.68 42 MOST LIKELY 0.36 9 MOST LIKELY 0.57 15.39 43 OPTIMISTIC 34 0.41 13.94 OPTIMISTIC 0.20 6.6 44 27.54 25.67 45 46 a RANGE FOR THE RATE OF RETURN (CAMERA R)= 14 [34-20] 47 RANGE FOR THE RATE OF RETURN (CAMERA S) = 17 [33-16] 90 48 49 b 50 EXPECTED RETURN FOR CAMERA R= EXPECTED RETURN FOR CAMERAS 27.54 25.67 51 52 C WHICH CAMERA PURCHASE IS RISKIER: CAMERAS BECAUSE THE RANGE IS HIGHER FOR CAMERAS CAMERA S IS RISKIER BECAUSE IT HAS HIGHER RANGE FOR RATE OF RETURN 53 54 55 56 H P EMV MEAN STDV assignment DEAR Sheet2 COV TIME SERIES corr REGRESSION range CAMERA TREND freg_MATRIX V FV DIVIDEND ferences INTERVAL, NORMAL BO Red 0 + HYPOTHI< 130% _ O ENG EJEND 31-10-2019