Fin419 Wk2 Individual

P5-3 - Risk Preferences
Sharon Smith, the financial manager for Barnett Corporation, wishes to evaluate three prospective investings: X, Y, and Z. Currently, the firm earns 12% on its investments, which have a insecurity index of 6%. The expected hark back and expected happen of infection of the investments are as follows:
|Investment | evaluate return |Expected risk index |
|X |14% |7% |
|Y |12% |8% |
|Z |10% |9% |


a) If Sharon were risk-indifferent, which investments would she recognise? Explain why.
If Sharon were risk-indifferent, she would select Investments X and Y because they have a higher return than 12% and risk would non be pertinent.
b) If she were risk-averse, which investments would she select? Why?
If Sharon were risk-adverse, she would select Investment X because it provides the highest return and has the lowest expected risk index.
c) If she were risk-seeking, which investments would she select? Why?




If Sharon were risk seeking she would select Investments Y and Z because she would be not be concerned with taking the greater risk.
d) Given the traditional risk preference behavior exhibited by financial managers, which investment would be preferred? Why?
Financial managers have traditionally been more risk-averse, and would likely choose Investment X because it provides the troupes normal increase in return and has increase risk.


P5-4 - Risk analysis
Solar Designs is considering an investment in an expanded output line. Two possible types of expansion are being considered. afterward investigating the possible outcomes, the company made the estimates shown in the undermentioned table:
|  |  |Expansion A |Expansion B |
| sign investment...If you want to get a full essay, order it on our website: Orderessay



If you want to get a full essay, wisit our page: write my essay .