Return and Risk .
You are the investment consultant for a Saudi Arabian hospital to assess the risk for its future investments.
There are three potential opportunities:
● Investing in Clinic A, or Clinic B or Clinic C.
● They have the following probabilities with regard to their return on investment:
Years Probability Return for Return for Return for
of Return Clinic A Clinic B Clinic C
1 0.10 5% 1% 10%
2 0.20 6% 3% 0%
3 0.40 7% 4% 5%
4 0.20 8% 5% 15%
5 0.10 9% 10% 20%
● What is the expected return for each clinic?
● Calculate the standard deviation of return for each clinic?
● If the hospital is risk averse, which clinic would you recommend?
● If the hospital wants the highest, return which clinic would you recommend?
● If the hospital wants a good return but with a medium level of risk, which clinic would you recommend?