You Are Going to Add One of the Following Three

question 75

Multiple Choice

You are going to add one of the following three projects to your already well-diversified portfolio.
PROJECT 1 PROJECT 2

PROJECT 3

Assume the risk-free rate of return is 2% and the market risk premium is 8%.If you are a risk averse investor,which project should you choose?

• A) Project 1
• B) Project 2
• C) Project 3
• D) Either Project 2 or Project 3 because the higher expected return on project 3 offsets its higher risk

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Definitions:

S-waves

Secondary or shear waves that travel through the body of the Earth during an earthquake, moving material perpendicular to the wave's direction of travel and cannot pass through liquids.

P-waves

Primary waves that are the fastest type of seismic waves, capable of moving through both solid and liquid layers of the Earth.

Surface Waves

Seismic waves that travel on Earth’s surface.

Subduction Zone

A region of the Earth's crust where one tectonic plate moves under another, often leading to volcanic activity and earthquakes.