Assume the risk-free rate of return is 2% and the market risk premium is 8%. If you are a risk averse investor, which project should you choose? a. Either Project 2 or Project 3 because the higher expected return on project 3 offsets its higher risk. b. Project 2 C Project 1 d. Project 3 Project 1 Probability -Standard Return Deviation, 50% chance R.D. 22% 12% 1.2 50%chance -4% Project 2 Standard Beat Probability 30%chance 36% R.d. 19.5% .8 40% chance 10.5% 30%chance -20% Project 3 Standard Probability Return Deviation Beta 10% chance 28% Beta 12% 2.0\ 70% chance 18% 20% Chance -8%