You Are Considering Investing in Two Independent Projects: a and B

Multiple Choice

You are considering investing in two independent projects: A and B. Project A requires an initial investment of $12,000. In one year, there is a 30% chance of a $10,500 return; a 50% chance of a $12,500 return; and a 20% chance of a $14,500 return. Project B requires an initial investment of $1,000. In one year, there is a 25% chance of a $950 return; a 25% chance of a $1,000 return; and a 50% chance of a $1,200 return. If you require a 7% return on your investment after one year, you should:

A) accept Project A and reject Project B
B) accept Project B and reject Project A
C) accept both projects
D) reject both projects