Eco 550 Chapter 2 Problem 1 5 6

# Eco 550 Chapter 2 Problem 1 5 6

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Eco 550 Chapter 2 Problem 1 5 6

Chapter 2 Problem 1:

The Managerial Challenge example in the Chapter discussed the rationale for a checked baggage charge on airlines. As a result of the new surcharge, what would you expect to happen to the number of checked bags, as well as the average weight of checked bags? Why?

The number & average weight of checked bags is expected to decrease. Consumer opposition to the new fees would prompt more carry-on luggage and increased scrutiny of the weight of luggage.

Chapter 2 Problem 5:

Two investments have the following expected returns (net present values) and standard deviation of returns:

PROJECTEXPECTED RETURNSSTANDARD DEVIATION

A 50,000 40,000

B250,000125,000

Which one is riskier? Why?

Investment A:V 40,000/50,000

.8

Investment B:V ...

Eco 550
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