Imagine you have 20000 and you are willing to invest nbspa, Business Economics

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Imagine you have 20000 and you are willing to invest nbspa

Imagine you have $20000 and you are willing to invest. You have two choices:

a) A safe investment that promises to pay 5% profit after 1 year.

b) A risky investment that has a 20% chance you might loose half of your money.

1) How much do you expect to get paid for a year in the second investment to be indifferent between two investment choices? (The two investments have the same Expected Profit)

2) What is the Risk Premium in the second choices?

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Business Economics: Imagine you have 20000 and you are willing to invest nbspa

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Business Economics: Imagine you have 20000 and you are willing to invest nbspa

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