Question: Suppose you have just inherited $ 1 0 comma 1 0 0 1 0 , 1 0 0 and are considering different options for investing
Suppose you have just inherited
$ comma
and are considering different options for investing the money to maximize your return.
If you are riskneutral that is neither seek out or shy away from risk which of the following options should you choose to maximize your expected return?
A
Invest the money in a corporate bond, with a stated return of
but there is a chance of
the company could go bankrupt.
B
Put the money in an interestbearing checking account, which earns
The FDIC insures the account against bank failure.
C
Hold the money in cash and earn zero return.
D
Loan the money to one of your friends' roommates, Mike, at an agreed upon interest rate of
but you believe there is a
chance that Mike will leave town without repaying you.
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