(Expected return and risk) Procter & Gamble is considering three possible capital investment

projects. The projected returns depend on the future state of the economy as given

here.

a. Calculate each project's expected return, variance, and standard deviation.

b. Rank the projects on the basis of (1) expected return and (2) risk. Which project would

you choose?

PROJECTED RETURN

State of the Probability of

Economy Occurrence 1 2 3

Recession 0.1 9% 3% 15%

Stable 0.7 13 10 11

Boom 0.2 17 22 5

projects. The projected returns depend on the future state of the economy as given

here.

a. Calculate each project's expected return, variance, and standard deviation.

b. Rank the projects on the basis of (1) expected return and (2) risk. Which project would

you choose?

PROJECTED RETURN

State of the Probability of

Economy Occurrence 1 2 3

Recession 0.1 9% 3% 15%

Stable 0.7 13 10 11

Boom 0.2 17 22 5

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