Expected Returns and Standard Deviations of Security Assignment | Homework For You
a) Company EEF ltd is considering an investment of €100,000. The desired payback period is 3 years. The board of directors have identified two alternatives; project A and project B. The expected annual cash flows are as follows:
Required: Calculate the Payback period of each project and advise EEF’s board of directors which project they should invest in. (7 marks)
b) Mrs Daisy is considering two securities, A and B, and the relevant information is given below:
1. Calculate the expected returns and standard deviations of security A and security B. (5 marks)
2. Explain how diversification can reduce the unsystematic risk of a given portfolio? (3 marks)Get Finance Homework Help Today