Table 101
Returns for Investment Projects Under Different States of the the World

question 9

Multiple Choice

Table 10.1
Returns for investment projects under different states of the world
$$\begin{array} { | l | c | c | c | } \hline & R _ { b } & R _ { n } & R _ { g } \\\hline \text { Project 1 } & \mathbf { 8 0 } & \mathbf { 1 0 0 } & \mathbf { 1 2 0 } \\\hline \text { Project 2 } & \mathbf { 5 0 } & \mathbf { 1 0 0 } & \mathbf { 1 5 0 } \\\hline\end{array}$$
-Suppose that only three states of the world - bad (b) ,normal (n) and good (g) - are possible,and suppose that the normal state occurs with probability 0.5,while the bad and good states each occur with probability 0.25.Consider two investment projects for which the returns in the three states are given in.What is the expected return for Project 2?

• A) 50
• B) 100
• C) 150
• D) 200

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Definitions:

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