Which of the Following Investment Options Is the Most Profitable

question 26

Multiple Choice

Which of the following investment options is the most profitable in percentage terms?

• A) A government bond with a coupon payment of $10, purchased at $100 and sold at $90 after a year.
• B) A government bond with a coupon payment of $15, purchased at $175 and sold at $155 after a year.
• C) A share with a dividend payment of $5, purchased at $50 and sold at $60 after a year.
• D) A Treasury bill purchased at $160 and sold at $175 after a year.

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Definitions:

Real Rate

The interest rate adjusted for inflation, providing a more accurate indication of the borrowing cost or investment return in terms of real purchasing power.

Principal

The original sum of money borrowed in a loan, or the original amount invested, excluding any interest or dividends.

Inflation

The pace at which prices for general goods and services ascend, diminishing the capacity to purchase.

Price Appreciation

refers to an increase in the value of an asset over time, typically evidenced by a higher market price.