Use Exhibit 10.2 to determine the expected rate of return E ( R ) for the combination of Projects C and D.

A. 5%

B. 10%

C. 13,5%

D. None of the above

B. Economic Probability State of Occurrence Rate of Return if State Occurs C D AB A B AC AD EXHIBIT 10.2 Estimated Returns for Four Individual Investments and Three Portfolios Very poor Poor Average Good Very good 0.10 0.20 0.40 0.20 0.10 1.00 -10% o 10 20 30 30% 20 10 O -10 -25% -5 15 35 55 15% 10 0 25 35 10% -17-5% 10 -2.5 10 12.5 10 27.5 10 42.5 2.5% 5.0 5.0 22.5 32.5 10.0% Expected rate of return Standard deviation 10.0% 15.0% 12.0% 11.0% 21.9% 12.1% 10.0% 12.5% 0.0% 16.4% 11.0% 10.1% 11.0%