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Question: Assume interest rate is 5%. We are uncertain about the project. The annual profit has two outcomes, a gain $700 or a loss $(-300). The probability of a loss is 0.2. The useful life has two outcomes: either 5 or 2 years, each with probability 0.5. The life and the benefit are independent. What is the risk of this project (measured by the standard deviation)?

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Category:- Basic Finance
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