If the Required Return from an Asset Is 10%,and the Asset

question 9

Multiple Choice

If the required return from an asset is 10%,and the asset has a 60% probability of yielding a 20% return and a 40% probability of earning a 5% return,you should:

• A) Not acquire the asset since the expected return of 32% exceeds the required return.
• B) Purchase the asset since the expected return of 14% exceeds the required return.
• C) Buy the asset because the expected return of 32% exceeds the required return.
• D) Forgo the investment opportunity since the expected return of 14% is too low.
• E) Buy the asset because the expected return of 12.5% exceeds the required return.

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