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should provide benefits over a 10-year period, and each requires an initial investment of $4,000. M constructed the table (on page 266) of estimates of rates of return and probabilities for pessimistic, optimistic results. Camera R Camera S amount probability amount probability Initial investment 4000 1 4000 1 Annual rate of return pessimistic 0.2 0.25 0.15 0.2 most likely 0.25 0.5 0.25 0.55 optomistic 0.3 0.25 0.35 0.25 a. Determine the range for the rate of return for each of the two cameras. The range is found by subtracting the return associated with the pessimistic  from the return associated with the optimistic outcome. Camera R Camera S Range 0.1 0.2 b. Determine the expected value of return for each camera. The value of a return, is the most likely return on an asset. It is calculated as follows r = rj= return for the jth outcome Prj= probability of occurrence of the jth outcome
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This note was uploaded on 04/22/2011 for the course FIN & ACC 504 & 502 taught by Professor Harper&tai during the Spring '11 term at Grand Canyon.

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P5-5 work -...

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