why is it B?

The management of a company chose a project between three mutually exclusive projects. The project chosen is going to be completed in one year, and after that the company will terminate its operations and close. The economic conditions in the upcoming year can be either good (with probability 0.3) or bad (with probability 0.7). The payoffs of the projects, that is the value of the assets after one year, are different. The first project has a low payoff volatility, the second has a medium payoff volatility and the third has a high payoff volatility. The payoff characteristics are reported in the table below: Situation Low Volatility Payoff Medium Volatility High Volatility Payoff Payoff Good (Pr. 0.3) $10,500,000 $12,200,000 15,500,000 Bad (Pr. 0.7) $9,500,000 $8,000,000 $7,000,000 The company has an outstanding zero-coupon bond with face value $8,500,000, maturity one year and market value equal to $7,770,045 . Assume that all agents are risk neutral and that the risk-free rate is 4.89%. What project was chosen? (a) The low volatility project. (b) The medium volatility project. (c) The high volatility project. (d) It cannot be determined. (e) I choose not to