Suppose there are two projects A and B whose cash flows next year will depend on the state of the Economy. The Economy next year can be either in recession (with 50% chance) or economic expansion (50% chance). Cash flows for Project A are as high as $8.0 million if an economic expansion occurs, or as low as $0 if a recession occurs. Cash flows for Project B are as high as $4.2 million if an economic expansion occurs, or as low as $3.8 Million if a recession occurs. Which of the following is true?

I. If project A and project B are correctly priced today by rational investors, Right project B will likely to generate lower expected (average) return.

II. Rational investors are likely to pay the same for Project A and for Project B today.

PLEASE EXPLAIN WHY!