Suppose Interest of 5% for Two Years Can Be Earned

question 96

Multiple Choice

Suppose interest of 5% for two years can be earned on $1,000 saved today with no risk.What is the least amount a person would need to have a 50% chance of winning to be willing to face a 50% chance of losing $1,000 today and be considered risk averse?

• A)$907.03 to be paid in two years
• B)$1,000.01 to be paid in two years
• C)$1,100.01 to be paid in two years
• D)$1,102.51 to be paid in two years

---

Definitions:

Outstanding Checks

Checks that have been written and recorded in accounting but not yet cleared or cashed by the bank.

Service Charge

An additional fee added to a customer's bill for the provision of certain services.

Bank Statement Balance

The total amount of money that is available in an individual's bank account at the end of a given period, according to the bank’s records.

Checkbook Balance

The current amount of money recorded in a checking account, according to the account holder's records.