A Risk-Free Investment of $50,000 Offers an Annual Return of 6

question 42

Multiple Choice

A risk-free investment of $50,000 offers an annual return of 6%. A risky investment of $50,000 has a 40% probability of default, in which case it will pay only $25,000.
-Refer to the information above. What return must the risky investment promise?

• A)8.1%
• B)43.3%
• C)71.7%
• D)62.0%

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