Jamie has a fixed amount of savings and is planning to invest in one of two different projects with the same expected return on investment.Other things being equal,Jamie will most likely invest in:
A) the project that is more easily reversed.
B) the project that is less easily reversed.
C) either of the two projects regardless of how reversible they are.
D) neither of the two projects because there is always uncertainty in their returns.

Question

Quizplus · Accepted Answer

If both projects have the same expected return on investment, Jamie is better off investing in the project that is more easily reversed. This is because it provides more flexibility and reduces the risk of loss in case things do not go as planned. In contrast, investing in the project that is less easily reversed may increase the risk of losing money in case changes need to be made along the way.

Jamie Has a Fixed Amount of Savings and Is Planning