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QUESTION 18 An investor is considering a short-term investment in a resort property on a Caribbean island. If the weather is reasonably stable over the
QUESTION 18 An investor is considering a short-term investment in a resort property on a Caribbean island. If the weather is reasonably stable over the next year, the value of the investment is expected to be $1.2 million; however, if this proves to be a heavy hurricane year, the value is expected to be $0.5 million. According to the experts, there is a 30% chance that this will be a year of many hurricanes. The appropriate expected rate of return is 20%. If this investment is purchased for its fair market value what is the expected return if there is a heavy hurricane season? Round your answer to the nearest tenth of a percent O .40.2% 37.5% 39.4% 10.1%
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