Assume that the risk free rate is 1% per year and the expected return on the market is 5%.

Consider the following 4 projects that all require an investment of 1,000 and all have a beta of 0.4.

	t=1	t=2	t=3
Cash flow of project 1	0	0	1400
Cash flow of project 2	100	900	400
Cash flow of project 3	1300	0	0
Cash flow of project 4	400	400	400

Which project should you undertake?

Select one:

a. Project 1

b. Project 3

c. Project 4

d. Project 2