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

question 11

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.The expected returns ______________.The variance for project 2 is ________making ___________ the better investment.

• A) Are equal; larger; project 1
• B) Are equal; smaller; project 1
• C) Are close but not equal; larger; project 2
• D) Are close but not equal; smaller; project 2

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Definitions:

Piece Rate Plans

Compensation systems where employees are paid based on the quantity of work completed or units produced, which can motivate higher productivity.

Merit Pay

A compensation strategy that provides salary increases or bonuses based on employee performance achievements.

Standard Hour Plans

Compensation systems where workers are paid based on a fixed rate for each unit of production completed within a standard time.

Stock Ownership

Refers to holding shares or equity in a company, which can be a form of compensation or investment, aligning employees' interests with the organization's success.