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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Definitions:

Enol

An organic compound containing a hydroxyl group directly connected to a carbon-carbon double bond, often in equilibrium with its keto form.

2,2,4-Trimethyl-3-pentanone

A chemical compound with the molecular formula C8H16O, serving as a ketone with its carbonyl group located on the third carbon atom.

Enolizable Ketone

A ketone capable of tautomerizing to an enol, which is a compound with a double bond and an alcohol group.

Enolate Salt

A negatively charged ion formed by the deprotonation of an alpha-carbon of a carbonyl compound, involved in various organic synthesis reactions.