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An investor is considering 2 investments, A, B, which can be purchased now for $10. There is a 40% chance that investment A will grow rapidly in value and a 60% chance that it will grow slowly. If A grows rapidly the investor can cash it in for $80 or trade it for investment C which has a 25% chance of growing to $100 and a 75% chance of reaching $80. If A grows slowly it is sold for $50. There is a 70% chance that investment B will grow rapidly in value and a 30% chance that it will grow slowly. If B grows rapidly the investor can cash it in for $100 or trade it for investment D which has a 20% chance of growing to $95 and an 80% chance of reaching $80. If B grows slowly it is sold for $45.
a) Draw the decision tree for this problem.
b) What is the EMV
c) What strategy would you implement?
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Consider two Portfolios, A and B. A is equally-weighted portfolio comprised of OIP and Riskfree.
Who should be responsible for correcting this problem as we go forward?
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What some of the factors that a finance manager considers in choosing an appropriate discount rate for a capital investment project
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how much will he have saved in eight years when he buys his house?
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What is the standard deviation of the portfolio of equally weighted securities listed below?
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