A Project Offers a 30% Probability of a Payoff After

question 49

Multiple Choice

A project offers a 30% probability of a payoff after one year of $2 million and a 70% chance of a payoff of $1 million.What is the maximum you would invest in this project today if the discount rate is 10%?

• A) $818,181.82
• B) $1,181,818.18
• C) $1,300,000.00
• D) $1,430,000.00

---

Definitions:

Microchip

A small semiconductor device containing integrated circuits used for various electronics and computing functions.

Tire(s)

Rubber-based components fitted around the rims of vehicle wheels to provide traction, support the vehicle load, and absorb shock from the road.

Autarky

A situation where a country or economy is self-sufficient and does not engage in international trade or relies on imports.

Comparative Advantage

An economic principle that states a country or individual can produce a good or service at a lower opportunity cost than others.