Robert is risk averse and has $1,000 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 $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.Robert 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

As Robert is risk-averse, he would prefer a low-risk investment option. Option A is a risk-free government bond that guarantees a 5% return each year for two years. On the other hand, option B is a low-risk stock, but it still carries some amount of risk, which might not suit Robert. Option C is a high-risk stock with a long horizon, which is not suitable for Robert. Therefore, Robert should choose option A as it offers a guaranteed return without any risk.

Robert Is Risk Averse and Has $1,000 with Which to Make