1. What is the minimum cash flow that could be received at the end of year 3 to make the following project "acceptable"? Initial cost = $100,000; cash flows at end of years 1 and 2 = $45,000; opportunity cost of capital = 15%
2. Arbor Systems and Gencore stocks both have a volatility of 40%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) + 1, (b) 0.50, (c) 0, (d)-0.50, and (e)-1.0. In which cases is the volatility lower than that of the original stocks?