1. What is the relationship between risk and return? Give an example of 2 different investors at different spots on this spectrum, and what types of investments they would choose.
2. As part of its renovation project, a hotel is choosing between two grades of carpet to install. Grade A costs $28 and must be replaced every nine years. Grade B costs $22 and must be replaced every six years. Which carpet should the hotel choose? The cost of capital for the hotel is 13%.