B D E G H . K Prob. Question 3 Market State Bull Question 3a Question 3b Recovery Downturn ----------- Bear 45% 21% 17% 17% Market Return 18.01% 9.93% -1.28% -5.87% CashFlow 219,115 126,195 2,720 55,505 A colleague has asked you to assist with conducting a simple 1 year valuation of a project applying the certainty equivalent method. You have been provided data on possible market and cash flow movements as well as thier associated probabilities. Assuming a risk free of 6%, the covariance between the market and cash flow is closest to: Risk-free rate Initial Cost 6% 95,277.09 Options A: 10 584.40 C: 13 455.16 B: 116 191.57 D: 124 392.28