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FIN-504 MODULE 3 HW

FIN-504 MODULE 3 HW - FIN 504 Finance Principals Gerald...

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FIN 504 - Finance Principals Gerald McGill Grand Canyon University Module Three - Mathematics of Risk and Return P5-5 A) Range of Rate of Returns (Camera R) = 10% Range of Rate of Returns (Camera S) = 20% B) Camera R Camera S Rate of Return (After 10 Years) Probability Rate of Return (After 10 Pessimistic 20% 0.25 = 0.05 Pessimistic Most Likely 25% 0.50 = 0.125 Most Likely Optimistic 30% 0.25 = 0.075 Optimistic Expected Return = 0.25 C) Camera S would be the riskier investment. Though the total weighted value of Camera S is higher tha rate of returns and the existing .20 probability of earning the lowest expected return on investment ex have learned in class: In order to achieve greater overall returns on investment, investors must incur g P5-10 A) 1) Range of Rate of Returns (Project 257) = 110% Range of Rate of Returns (Project 432) = 40% 2) Project 257 Project 432 Rate of Return Probability Weighted Value Rate of Ret -10% x 0.01 = 0 10% 10% x 0.04 = 0 15% 20% x 0.05 = 0.01 20% 30% x 0.10 = 0.03 25% 40% x 0.15 = 0.06 30% 45% x 0.30 = 0.14 35% 50% x 0.15 = 0.08 40% 60% x 0.10 = 0.06 45% 70% x 0.05 = 0.04 50% 80% x 0.04 = 0.03 100% x 0.01 = 0.01 Expected Return = 0.45 3)
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