In the year of 1675, spices are wroth more than gold and theyonly grow in the Moluccas. Spice prices are related to market events and hence their =2.The spices cost $1,000 and the ship costs $10,000.If you buy a ship and set sail, there is a 60% chance that yourship will not return.If the ship does not sink, you expect to sell the spices in oneyear for $30,000 (uncertain, depends on the market) and theship for $10,000 (for certain).Should you set sail if RF = 5% and E(Rm) = 15%?Hint: think of the ship and the spice as two projects.

In the year of 1675, spices are wroth more than gold and they only grow in the Moluccas. Spice prices are related to market events and hence their B 2 The spices cost$1,000 and the ship costs $10,000. If you buy a ship and set sail, there is a 60%chance that your ship will not return. If the ship does not sink, you expect to sell the spices in one year for $30,000 (uncertain, depends on the market and the ship for $10,000 for certain) Should you set sail if RF 35% and E(Rm) 15%? Hint: think of the ship and the spice as two projects