China Development Industrial Bank

China maturement Industrial Bank Integrated Case Risk and Return Assume that you recently graduated with a major in finance. You just landed a job as a financial planner with China Development Industrial bank (CDIB), a large financial services corporation. Your first appellative is to invest $100,000 for a client. Because the funds to be invested in a business at the end of 1 year, you extradite been instructed to plan a 1-year holding period. Further, your boss has restricted you to the investment alternatives in the following table, shown ith their probabilities and associated outcomes.RETURNS ON ALTERNATIVE INVESTMENTS ESTIMATED RATE OF RETURN State Of the Economy Probability T-bills High Tech Collections U. S. Rubber food market Portfolio 2-stock-portfolio Recession 0. 1 5. 5% -27. 0% 27% 6% -17% 0% Below Average 0. 2 5. 5% -7% 13% -14% -3% Average 0. 4 5. 5% 15% 0 3% 10% 7. 50% Above Average 0. 2 5. 5% 30% -11% 41% 25% Boom 0. 1 5. 5% 45% -21% 26% 38% 12% r(hat) expected re turn 1. 00% 9. 80% 10. 50% ? (std deviation) 0. 0% 13. 20% 18. 80% 15. 20% 3. 40% CV 13. 20% 1. 90% 1. 4% 0. 50% beta -0. 87% 88. 00%CDIBs economic forecasting staff has developed probability estimates for the state of the miserliness and its security analysts have developed a sophisticated computer program, which as used to estimate the rate of return on each alternative under each state of the economy. High Tech Inc. is an electronics firm, collection Inc. collects past due(p) debts, and U. S. Rubber manufactures tires and various other rubber and plastic products. a. (1)Why is the T-bills return independent of the state of the economy? Do T-bills promise a completely risk-free return? Explain. The estimated rate of return on T-bill which is 5. 5% does not depend on