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A risk neutral investor in an uncertain environment is facing the following payoffs and probabilities for an investment project: Event Pr(event) Stronger dollar 0.25 Weaker
A risk neutral investor in an uncertain environment is facing the following payoffs and probabilities for an investment project: Event Pr(event) Stronger dollar 0.25 Weaker dollar 0.50 No change in the value of the dollar 0.25 Payoff $100,000 $20,000 $80,000 Market interest rates are currently 8% and the payoff will be received in exactly 2 years. The amount invested is $25,000. What is the expected value of this project? $ (round your answer to the nearest dollar). What is the discounted expected value of this project? $ (round your answer to the nearest penny)
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