(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
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
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
This solution shows step-by-step calculations to determine the project's expected return, variance, and standard deviation. In addition, it ranks the projects on the basis of expected return and risk.