The Following Table Shows the Expected Value and Variance for 5

question 36

Multiple Choice

The following table shows the expected value and variance for 5 projects a firm can undertake. $$\begin{array} { c c c } \text { Project} & \text { Expecled Value} & \text { Variance } \\A & \$ 100 & \$ 124 \\B & \$ 220 & \$ 110 \\C & \$ 100 & \$ 138\\D & \$ 100 & \$ 138 \\E & \$ 200 & \$ 124\end{array}$$ Which of the following is (are) correct if the mean-variance rule is used for the decision?

• A)Project C is preferable to A.
• B)Project E is preferable to B.
• C)Project D is preferable to C.
• D)all of the above
• E)none of the above

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Definitions:

Expiration

The point in time when a financial contract (e.g., option, futures contract) reaches its end date and is either executed or becomes void.

Dividend

Shareholders receive a payment from a corporation, commonly as a share of the company's profits.

Interest Rate

The percentage of a sum of money charged for its use, typically expressed on an annual basis.

Put Option

A financial contract giving the option buyer the right, but not the obligation, to sell a specified quantity of an asset at a set price (the strike price) within a specified time.