Q1. The infidelity mutual fund projects three possible outcomes for next year: weak performance (-5 percent), good performance (10 percent) and outstanding performance (30 percent). The good performance has a 50 percent chance of happening and is twice as

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Q1. The infidelity mutual fund projects three possible outcomes for next year: weak performance (-5 percent), good performance (10 percent) and outstanding performance (30 percent). The good performance has a 50 percent chance of happening and is twice as likely as the other outcomes. What is the expected value? Q2. An investment has the following range of outcomes and probabilities: Outcome Probability of outcomes 6% 0.20 9 0.60 12 0.20 Calculate the expected value and the standard deviation (round to two places after decimal point where necessary). Q3. Compute the duration for the following data. Use a discount rate of 13 percent. Year cash flow 1 $ 50 2 50 3 50 4 50 5 50 5 $1,000 b. Explain why the answer to part A is higher than the answer to problem 2. c. if in part A the discount rate were 10 percent instead of 13 percent, would duration be longer or shorter? You do not need to actually compute a value; merely indicate an answer based on the discussion material in the text.
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