The Glad Its Finally Over Company is considering three possible capital projects for next year....
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Finance
The Glad Its Finally Over Company is considering three possible capital projects for next year. Each project has a one-year life and project returns depend on the state of the economy. The estimated rates of return are shown in the following tables:
| State of the Economy | Probability of Each State Occurring | Rates of Return if State Occurs | |
|---|---|---|---|
| Project A | Project B | ||
| Boom | .40 | 6% | 25% |
| Normal | .40 | 8% | 6% |
| Recession | .20 | 15% | -5% |
| Statistic | Project A | Project B |
|---|---|---|
| Expected Return | 8.60% | 11.40% |
| Standard Deviation | 3.32% | 11.81% |
Given these probabilities and possible rates of return, the correlation of the cash flows for the projects is ____ %.
A. -86.25
B. -1.09
C. -1.64
D. 86.25
E. None of these are correct
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