You are going to invest all of your funds in one of three projects with the following distribution of
possible returns:
PROJECT 1 PROJECT 2
Probability Return
Standard
Deviation Beta Probability Return
Standard
Deviation Beta
50% Chance 22% 12% 1.1 30% Chance 36% 19.5% 1.0
50% Chance -4% 40% Chance 10.5%
30% Chance -20%
PROJECT 3
Probability Return
Standard
Deviation Beta
10% Chance 28% 12% 1.2
70% Chance 18%
20% Chance -8%
If you are a risk averse investor, which one should you choose?
A) Project 1
B) Project 2
C) Project 3
D) Either Project 1 or Project 2 because they have the same expected return
C
You might also like to view...
A health insurance policy does NOT go into force if
A) the applicant pays the initial premium B) the applicant satisfies the conditions of the conditional receipt C) the producer completes the application D) the producer delivers the policy"
Controlling is primarily concerned with
a. making rational decisions. b. comparing actual performance to a predetermined standard. c. influencing people to perform better. d. laying out work in a logical manner.