Precision group has estimated the potential returns

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Precision Group has estimated the potential returns that may be achieved from a project, together with the likelihood of such returns occurring, detailed in the table below: Possible Returns to Probability of occurence is a) -8% , 10% b) 5% , 20% c) 12% , 50% and d) 27% , 20%. Precision Group has also estimated that the risk of this project, measured with Beta, is 1.2. The market portfolio that they have chosen has returned an average of 11% per annum over the past 8 years. The current risk free rate is 4%. i. Calculate the expected return and the standard deviation of returns for this investment. ii. Identify whether Precision Group should invest in this project. Provide a reason for your decision.

Reference no: EM132036985

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