John is evaluating two investment opportunities, one with an expected outcome of a 5% return on investment (standard deviation of 1 percentage point) and one with an expected outcome of 7.5% return on investment (standard deviation of 5 percentage points). John will decide to invest in

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    the 7.5% project if he is risk averse, in that he can expect to earn a 12.5% return on his investment.
     the 5% project if he is risk averse, in that he expects to earn a 5% return with little variability.
     the 5% project if he is risk loving, in that it is possible for him to earn up to a 6% return.
     the 7.5% project if he is risk loving, in that he can expect to earn 12% return on his investment, given the standard deviation of 5%.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

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the 5% project if he is risk averse, in that he expects to earn a 5% return with little variability.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

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