Project A and Project B both have expected values of $5,000. Project A has a standard deviation of $1,000, while Project B has a standard deviation of $3,000. Comment on the desirability of these projects
What will be an ideal response?
Both have the same expected value, but A has a lower standard deviation. It is 99% certain that the return from A will be between $2,000 and $8,000. However, for B, it is 99% certain that the return will be between $-4,000 and $14,000. Project B is more risky and thus less desirable.
Economics
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Exchange rates are important because
A) They affect the affordability of imports B) they make exports either more or less expensive for foreign buyers C) They affect the value of foreign assets and their returns D) all of the above
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