4.Lindsey and Tobias have the opportunity to invest in a project that requires an investment of $3,000.There is a 35% chance of a $2,900 return;a 40% chance of a $3,400 return;and a 25% chance of a $4,500 return one year from now.Lindsey requires a 15% return on the project after the first year,but Tobias requires a return of only 12%.Using the expected rate of return:

Question

Quizplus · Accepted Answer

To determine if the investment is worthwhile, we need to calculate the expected rate of return:

Expected return = (0.35 x 2900 + 0.40 x 3400 + 0.25 x 4500) / 3000 = 1.187

This means that the project is expected to return 18.7% after the first year. Since this is greater than both Lindsey's requirement of 15% and Tobias's requirement of 12%, both should invest in the project.

4Lindsey and Tobias Have the Opportunity to Invest in a Project