Your uncle offers you a "sure-fire" investment opportunity. All you have to do is invest $2000 and you will get a guaranteed return of $2063 in 6 months' time. Your alternative is to place your money in a bank account paying 6% p.a. Assuming both alternatives are truly risk-free, would you undertake this investment? Why/why not? Select one: a. Yes, because the investment will generate a return of 6.3%, whereas the bank is only offering 3% for the period of the investment. b. No, because the investment will only generate a return of 3.15%, whereas the bank is offering 6%. c. Yes, because the investment will generate a return of 6.3%, whereas the bank is only offering 6%. d. You would be indifferent between accepting and not accepting the investment opportunity, because the return from the investment is the same as the return from putting money in the bank.
Your uncle offers you a "sure-fire" investment opportunity. All you have to do is invest $2000 and you will get a guaranteed return of $2063 in 6 months' time. Your alternative is to place your money in a bank account paying 6% p.a. Assuming both alternatives are truly risk-free, would you undertake this investment? Why/why not?
Yes, because the investment will generate a return of 6.3%, whereas the bank is only offering 3% for the period of the investment.
No, because the investment will only generate a return of 3.15%, whereas the bank is offering 6%.
Yes, because the investment will generate a return of 6.3%, whereas the bank is only offering 6%.
You would be indifferent between accepting and not accepting the investment opportunity, because the return from the investment is the same as the return from putting money in the bank.
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