Barbara is considering investing in a stock and is aware that the return on that
ID: 2701206 • Letter: B
Question
Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below calculate the coefficient of variation for the investment? (Round intermediate calculations and answer to 5 decimal places, e.g. 0.07680.)
Probability Return
________________________________________
Boom 0.7 25.00%
Good 0.1 15.00%
Level 0.1 10.00%
Slump 0.1 -5.00%
________________________________________
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $479,000 today, plus $479,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 8 percent, what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g. 5,275.)
Explanation / Answer
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