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.

Question

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.

Quizplus · Accepted Answer

The Answer of 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.

You Are Going to Add One of the Following Three