Answer to Question #131164 in Finance for Satyam

Question

The president of the Martin Company is considering two alternative investments, X and Y. If each investment is carried out, there are four possible outcomes. The present value of net profit and profitability of each outcome follow:
Investment X Investment Y
Outcome Net Present Value Probability Outcome Net Present value Probability
1 $ 20 million 0.2 A $ 12 million 0.1
2 8 million 0.3 B 9 million 0.3
3 10 million 0.4 C 6 million 0.1
4 3 million 0.1 D 11 million 0.5

Question 1: Risk management is responsibility of the
a. Customer
b. Investor
c. Developer
d. Project team
Question 2. The president of the Martin Company has the utility function U = 10 + 5P – 0.01 P^2. Which investment should she choose?
a. Investment x
b. nor investment X neither investment Y
c. Investment Y
d. None of the above
Question 3. What is the coefficient of variation of investment X?
Select one:
a. 37%
b. 23%
c. 47%
d. 65%

Answer 1

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