Rashad is risk averse and has $3,000 with which to make a financial investment. He 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 $3,307.50 in two years. Option C is a high-risk stock that is expected to be worth about $3,646.52 in four years. Rashad should choose
A)option A.
B)option B.
C)option C.
D)either A or B because they are the same to him.

Question

Quizplus · Accepted Answer

Rashad is risk averse, meaning he prefers to avoid risk when possible. Option A, the risk-free government bond, is the most suitable choice for someone with his risk preference, as it guarantees a return without any risk.

Rashad Is Risk Averse and Has $3,000 with Which to Make