What does your choice say about your risk tolerance

Assignment Help Financial Management
Reference no: EM131990487

Suppose I offer you a choice among several investments.  No matter which one you choose, you will invest the same amount of money, $200,000. Here are your investment choices and the expected results for the year. .

1 - Investment #1 will give you a guaranteed profit of $100,000 for the year.   So you end the year with $300,000 (your $200,000 investment + the $100,000 profit).

2 - Investment #2 gives you a 50% chance to make a profit of $200,000 and a 50% chance of zero profit for the year. But you will not lose any money. So you have a 50% chance to end the year with $400,000 but a 50% chance you will end the year with the same $200,000 you started with.

3 - Investment #3 provides a 50% chance to make a $400,000 profit for the year and a 50% chance of losing $200,000 for the year.   So at the end of the year, there is a 50% chance you will wind up with $600,000 (your $200,000 investment + $400,000 profit) but a 50% chance you will have nothing, having lost your $200,000 investment.

Which investment would you choose?  Why? What does your choice say about your risk tolerance?

Reference no: EM131990487

Questions Cloud

Research specific data mining or classification technique : Research any specific data mining or classification technique and propose a suitable technique or model to determine any association.
Example of operating cash flow : The dominant currency used by subsidiary in day-to-day operations is known as its currency. Which of following is not example of operating cash flow?
Select two it infrastucture domains and discuss about them : Using the IT Infrastructure domains and research you did in the discussion prepare a short paper on the vulnerabilities you presented.
List four examples of black agency with name of the person : List four examples of black agency with name of the person and specific action. Black agency when African Americans act for themselves instead of being acted.
What does your choice say about your risk tolerance : Which investment would you choose? Why? What does your choice say about your risk tolerance?
Definition of social entrepreneurship : You will produce an information-rich PowerPoint Presentation on the state of Social Entrepreneurship in a country in either Asia, Latin America or Africa.
Describe the events and your experience : Reflective Journal Assignment - Write a reflection report discussing and analysing any two topics explored in this course
Perform additional research on the claims auditing process : Your readings for this week illustrate the fact that there are several components to the auditing process. Perform additional research on the claims auditing.
Calculate the project initial time zero cash flow : Calculate the project's initial Time 0 cash flow, taking into account all side effects. What is the aftertax salvage value of this plant and equipment?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd