The College Copy Shop is in process of purchasing a high-tech copier. In their search, they have gathered the following information about two possible copiers A and B.
|
|
A
|
B
|
|
Initial Investment
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$10,000
|
$10,000
|
|
Annual rate of return
|
|
|
|
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Return(%)
|
Prob.
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Return(%)
|
Prob.
|
|
Pessimistic
|
11
|
0.30
|
9
|
0.30
|
|
Most Likely
|
18
|
0.45
|
18
|
0.45
|
|
Optimistic
|
22
|
0.25
|
25
|
0.25
|
a. Compute expected rate of return for each copier.
b. Compute variance and standard deviation of rate of return of each copier.
c. Which copier should they purchase?