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:

Bonds Redeemed Early

The process by which an issuer repays the principal amount of bonds before their maturity date.

Redemption Price

The amount paid to redeem a security or investment, often found in the terms of bonds or preferred stock.

Carrying Value

The book value of assets and liabilities as presented on a company’s balance sheet, which is the original cost minus any depreciation, amortization, or impairment costs.

Secured Bonds

Bonds that have specific assets of the issuer pledged as collateral.