You have just received a 1 million inheritance. You have the following four investment opportunities available: i
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Question:
You have just received a million inheritance. You have the following
four investment opportunities available:
i Investment in oneyear government bonds yielding
ii A loan to your cousin, who wants to open a restaurant. Your cousin
had arranged a oneyear bank loan for at but asks you
for a million loan at
iii. Investment in the stock market, which has an expected rate of return
of
iv Investment in local real estate, which you judge is about as risky as
the stock market. The opportunity you are considering will cost you
million and is forecasted to be worth million after one year.
of
Which of these investments have positive NPVs Which would you take?
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