Consider the following equally likely project outcomes:
A)Project Y has less uncertainty than Project X.
B)Project X has more variability than Project Y.
C)A and B.
D)Since Projects X and Y have the same expected outcomes of $500,investors will view them as identical in value.

Question

Consider the following equally likely project outcomes: 
A)Project Y has less uncertainty than Project X. 
B)Project X has more variability than Project Y. 
C)A and B. 
D)Since Projects X and Y have the same expected outcomes of $500,investors will view them as identical in value.

Quizplus · Accepted Answer

Uncertainty refers to the degree of risk or chance that something may go wrong or deviate from the expected outcome. Variability refers to the extent to which the possible outcomes of a project differ from each other. Project Y having less uncertainty means that it has a lower level of risk compared to Project X. On the other hand, Project X having more variability means that it has a wider range of possible outcomes compared to Project Y. Therefore, both A and B are correct. It is not true that investors will view Projects X and Y as identical in value just because they have the same expected outcome since investors also consider risk and variability as important factors in investment decisions.

Consider the Following Equally Likely Project Outcomes