Consider the Following Two Investment Alternatives: First, a Risky Portfolio

question 61

Multiple Choice

Consider the following two investment alternatives: First, a risky portfolio that pays a 20% rate of return with a probability of 60% or a 5% rate of return with a probability of 40%. Second, a Treasury bill that pays 6%. If you invest $50,000 in the risky portfolio, your expected profit after one year would be ________.

• A) $3,000
• B) $7,000
• C) $7,500
• D) $10,000

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