Concept explainers
A venture capitalist, willing to invest 51.000,000. has three investments to choose from. The first Investment, a software company, has a 10% chance of returning 55,000.000 profit, a 30% chance of returning S 1,000,000 profit, and a 60% chance of losing the million dollars. The second coftany, a hardware corrany, has a 20% chance of returning S3.000,000 profit, a 40% chance of returning Sl,000,000 profit, and a 0% chance of losing the million dollars. The third company a biotech firm, has a 10% chance of returning $6000000 profit, a 70% of no profit loss, and a 20% chance of losing the million dollars.
a. Construct a
b. Find the expected ‘a1ue for each investment.
c. Which Is the safest Investment? Why do you think so?
d. Which is the riskiest investment? Why do you think so?
e. Which Investment has the highest expected return, on average?
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