Question

Kylie 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. Kylie should choose Select one:

a. option A.
b. option B.
c. option C.
d. either A or B because they are the same to her.

Answer 1

The answer is "Option a".

Step-by-step explanation:

Risk appetite refers to individuals and a shareholder who doesn't even take risks or wants lower risk and care not when the return will be less than the high risk with the higher return policy. threat averses

It is risk-free, therefore Kylie will choose it. When he invests his
`\$1,000` interest rate is
`5\%` per year for two years

`5\% \ of\ \$1000 = 50`

`\$50` the year in which he receives
`\$100` as a share of his
`\$1000` investment in two years. The total return he receives is
`= \$1100`