Respuesta :
Answer:
Option A
Explanation:
Rashald should choose option A because it is low-risk, therefore guaranteeing to have $5,248.80 in two years.
Since Rashad is risk-averse, he should choose B. option A.
- The investment in risk-free government bonds offers Rashad the best investment vehicle that meets his risk profile.
- A risk-averse investor does not want increased returns to compensate for the higher risk in an investment.
Data and Calculations:
Total investment funds = $4,500
Rashad's risk profile = risk averse
Investment Options:
Option A Option B Option C
risk-free low-risk high-risk
government bond Stock Stock
Interest rate 8%
Investment period 2 years 2 years
Investment balance $5,200 $5,248.80 $6,122.20
Total return on investment $720 ($360 x 2) $748.80 $1,622.20
Thus, the best option for Rashad is Option A.
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