# Expected Value, Risk Measurement and Relative Risk

Hello,

I am looking to compare the work and formulas for the calculation of Expected Value, Absolute Risk Measurement, and Relative Risk for both projects. I have the answers, however, my textbook is horrible in explaining the work.

Project A

Probability Cash Flow

0.5 $200,000

0.5 $300,000

Project B

Probability Cash Flow

0.05 $0

0.80 $200,000

0.15 $400,000

https://brainmass.com/economics/economic-systems/expected-value-risk-measurement-relative-217451

#### Solution Preview

I am looking to compare the work and formulas for the calculation of Expected Value, Absolute Risk Measurement, and Relative Risk for both projects.

Project A Project B

Probability Cash Flow Probability Cash Flow

0.50 $200,000 0.05 $0

0.50 $ 300,000 0.80 $ 200,000

0.15 $ 400,000

Solution:- Calculation of Expected value of each project

If X is a discrete random variable with probability mass function p(x), then the expected value becomes

Project A

Probability Cash flow Expected ...

#### Solution Summary

The solution related to expected value and other calculations of project A and B is posed.

Calculate Returns & Variability. Risk Premiums, Expected Returns, Standard Deviations

9. Calculating Returns and Variability You've observed the following returns on Mary Ann Data Corporation's stock over the past five years: 216 percent, 21 percent, 4 percent, 16 percent, and 19 percent.

a. What was the arithmetic average return on Mary Ann's stock over this five-year period?

b. What was the variance of Mary Ann's returns over this period? The standard deviation?

10. Calculating Real Returns and Risk Premiums In Problem 9, suppose the average inflation rate over this period was 4.2 percent and the average T-bill rate over the period was 5.1 percent.

a. What was the average real return on Mary Ann's stock?

b. What was the average nominal risk premium on Mary Ann's stock?

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Discuss the applications of portfolio theory, the concept of time value of money on financial management analysis.