Consider the Following Two Investment Alternatives

question 60

Multiple Choice

Consider the following two investment alternatives.First,a risky portfolio that pays a 15 percent rate of return with a probability of 60% or a 5 percent return with a probability of 40%,and second,a T-bill that pays 6 percent.If you invest $50,000 in the risky portfolio,your expected profit would be __________.

• A) $5,500
• B) $7,500
• C) $25,000
• D) $3,000
• E) none of these

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Definitions:

Income

The monetary payment received for goods or services, or from other sources, as rents or investments.

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The process of exchanging information or ideas through various means, including speech, writing, visual images, or digital platforms.

Exchange

The process by which two or more parties trade goods, services, or other values to the mutual benefit of both or all.

Information

Data that is processed, organized, structured, or presented in a given context to make it meaningful or useful.