Rosie Is Risk Averse and Has $1,000 with Which to Make

question 6

Multiple Choice

Rosie is risk averse and has $1,000 with which to make a financial investment. She has three options. Option A is a risk-free government bond that pays 5 percent interest each year for two years. Option B is a low-risk stock that analysts expect to be worth about $1,102.50 in two years. Option C is a high-risk stock that is expected to be worth about $1,200 in four years. Rosie should choose

• A)option A.
• B)option B.
• C)option C.
• D)either option A or option B because Rosie is indifferent between those two options and they are superior to option C.