a Suppose you are the CEO of a bank and face two potential projects to invest in, both of which require 100 of initial investment. Project A delivers a return of 110 with prob. 70% and 90 with prob. 30%. Project B delivers a return of 150 with prob. 20% and 95 with prob. 80%. Assume debt is unsecured and hence it is fairly priced, demanding an expected net return of 0%. Assume two different cases: in the first case, the bank finances the chosen project with a leverage ratio of 5% (5 of equity and 95 of debt); in the second case, the leverage ratio is 10%. If you only want to maximise your bonus, which project would you choose if the bonus is made of equity in each case? = = = a. First case (LR = 5%): Project A. Second case (LR = 10%): Project B. O b. First case (LR = 5%): Project A. Second case (LR = 10%): Project A. O c. Project B in both cases. d. None of the others. a Suppose you are the CEO of a bank and face two potential projects to invest in, both of which require 100 of initial investment. Project A delivers a return of 110 with prob. 70% and 90 with prob. 30%. Project B delivers a return of 150 with prob. 20% and 95 with prob. 80%. Assume debt is unsecured and hence it is fairly priced, demanding an expected net return of 0%. Assume two different cases: in the first case, the bank finances the chosen project with a leverage ratio of 5% (5 of equity and 95 of debt); in the second case, the leverage ratio is 10%. If you only want to maximise your bonus, which project would you choose if the bonus is made of equity in each case? = = = a. First case (LR = 5%): Project A. Second case (LR = 10%): Project B. O b. First case (LR = 5%): Project A. Second case (LR = 10%): Project A. O c. Project B in both cases. d. None of the others