An Investor Is Considering Two Equally Risky Investments

question 28

Multiple Choice

An investor is considering two equally risky investments.Investment A is expected to return $1,000 per year for the next 5 years.Investment B is expected to return $6,000 at the end of 5 years.Which of the following statements is MOST correct if both investments A and B have the same cost?

• A) A risk averse investor will select investment B because it is expected to provide the most cash ($6,000 > $5,000).
• B) A risk averse investor will select investment A because it provides cash earlier than investment B.
• C) The investor will select investment A only if the cost is less than $1,000.
• D) The investor may select investment A or investment B depending on the opportunity cost of money.

---

Definitions:

Empowerment

The process of giving employees power and responsibility to make decisions and contribute to the organization's success.

Decisions

The act of making a choice among different options or actions based on judgment and information.

Discretion

The freedom to decide what should be done in a particular situation, often with careful judgment.

Organizational Success

The achievement of the goals and objectives set by an organization, often measured by financial performance, market share, or the fulfillment of its mission and vision.