You are going to invest all of your funds in one of three projects with the following distribution of
possible returns:
PROJECT 1 PROJECT 2
Probability Return
Standard
Deviation Beta Probability Return
Standard
Deviation Beta
50% Chance 22% 12% 1.1 30% Chance 36% 19.5% 1.0
50% Chance -4% 40% Chance 10.5%
30% Chance -20%
PROJECT 3
Probability Return
Standard
Deviation Beta
10% Chance 28% 12% 1.2
70% Chance 18%
20% Chance -8%
If you are a risk averse investor, which one should you choose?
A) Project 1
B) Project 2
C) Project 3
D) Either Project 1 or Project 2 because they have the same expected return
C
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A fixed variable model offered by the model management module of a decision support system does not change.
Answer the following statement true (T) or false (F)
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