John Invested $1,000 in a Risky Investment and Bill Invested

question 56

Multiple Choice

John invested $1,000 in a risky investment and Bill invested $1,000 in a less risky investment.One year later,Bill's investment is worth $1,030.Which of the following statements is MOST correct?

• A) If John's investment is worth less than $1,030, then John was irrational to invest in the risky project.
• B) John's investment must be worth more than $1,030 because of the risk-return trade-off, given that John's investment was more risky.
• C) If John's investment is worth more than $1,030, then Bill was irrational to invest in the less risky investment.
• D) The worth of John's investment cannot be determined with the information given.

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Definitions:

Fair Insurance Policy

Describes an insurance contract that provide coverage at reasonable, transparent, and equitable terms for both parties.

Uncertainty

The state of having limited knowledge about present or future events, making outcomes unpredictable.

Expected Value

The anticipated value of a variable, calculated as a weighted average of all possible values, with weights being their probabilities of occurrence.

Income

The total amount of money received by an individual or group over a certain period, often derived from work, investments, or business ventures.