If You Invest $100 Now in Firm A, in One

question 14

Essay

If you invest $100 now in firm A, in one year you will get back $(30 - T), where T is the average temperature during the next summer.If you invest $100 now in firm B, in one year you will get back $(180 - T).The expected value of T is 70 and the standard deviation of T is 10.
a.Draw a graph showing the combinations of expected return and standard deviation that you can have by dividing $100 between stock in A and stock in B.(Hint: Expected value has the property that E(ax + b)= aE(x)+ b and standard deviation has the property that SD(ax + b)= [(absolute value of a)times SD(x)] +
b.What is the expected value and standard deviation of the safest investment strategy you can make by this means?
c.What is the highest expected value you can achieve?

Recognize the implications of inventory management on financial statements, specifically the balance sheet and income statement.

Understand the application of the LIFO and FIFO inventory cost flow assumptions in various inventory systems.

Identify the requirements and accounting treatment under the retail inventory method.

Comprehend the significance of goods in transit and consignment arrangements on inventory valuation.

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Definitions:

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