QuestionMicro-Pub, Inc. is evaluating two cameras (R and S).
a. Find the rate of return range for both cameras.
b. Calculate the expected return for each camera.
c. Which camera is riskier and why?
Initial investment: \$4,000 for both.
Camera R: Pessimistic 20%, Most likely 25% (0.50), Optimistic 30% (0.25).
Camera S: Pessimistic 15% (0.20), Most likely 25% (0.55), Optimistic 35% (0.25).
Studdy Solution
The expected value of return is used to determine which camera has a higher average return. Compare the expected values of camera R and to determine which camera has a higher expected return.
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