Consider the Following Two Investment Alternatives

question 32

Multiple Choice

Consider the following two investment alternatives. First, a risky portfolio that pays 15% rate of return with a probability of 40% or 5% with a probability of 60%. Second, a Treasury bond that pays 6%. The risk premium on the risky investment is ________.

• A)1%
• B)3%
• C)6%
• D)9%

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Definitions:

Peripheral Vision

The part of vision that occurs outside the very center of gaze, allowing humans to perceive objects and movement outside of the direct line of sight.

Cones

Photoreceptor cells in the retina of the eye that function best in bright light and enable color vision.

Blind Spot

An area in the visual field that lacks detection due to the absence of photoreceptor cells in the optic disc of the retina.

Brain

The organ in the head of an organism that controls its actions, thoughts, feelings, and interactions with the environment.