You Are Going to Add One of the Following Three

question 126

Multiple Choice

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