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VaVoom Ltd. (VaVoom) is a candy and chips manufacturer located in Rondebosch, Western Cape. The entity has a 30 June 2021 financial year end. VaVooms product development department is continuously evaluating the success of its current products whilst developing ideas for new products which, if considered as having a high enough potential rate of success, is manufactured, and added to the current product ranges VaVoom has on offer. The product development department is currently evaluating two possible new products Golden and Zoop. Only one of the two will be selected to be introduced to the market. Both Golden and Zoop are chips, but while Golden has a more traditional taste, Zoop is more exotic. Consequently, it is known that Golden will be accepted by the market and sold whereas the definite success of Zoop is more uncertain. Should Zoop however be popular in the market, the returns generated from the quantity sold will greatly out favour Goldens returns which will be more conservative. In order to perform an evaluation of which product to choose, VaVoom has conducted research on the probability of each products success and the returns which they will receive in each of the various outcomes. Golden: Outcome Probability Return if this outcome manifests Highly popular 26% 44% Average 58% 37% Fails 16% 21% 100% ANNEXURE I: FORMATIVE ASSESSMENT 2 92 HFMN230-1-Jul-Dec2021-FA2-V2-ES-30052021 Zoop: Outcome Probability Return if this outcome manifests Highly popular 33% 71% Average 36% 29% Fails 31% 15% 100% Required: 2.1 Calculate the expected returns of Golden and Zoop respectively. (7 marks) 2.2. Calculate the risk attached to investing in Zoop. (15 marks) 2.3. Calculate the chance of Zoops return to be 21% or less. Assume an expected return of 32%, a risk of 5.14% and a normal distribution. (6 marks) Round to two decimals where required

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