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Business, 07.04.2020 23:44 BIGchunguslol

You have $1,500 to invest and are considering buying some combination of the shares of two companies, DonkeyInc and ElephantInc. Shares of DonkeyInc will pay a return of 8 percent if the Democrats are elected, an event you believe to have a 20 percent probability; otherwise the shares pay a zero return. Shares of ElephantInc will pay 6 percent if the Republicans are elected (a probability of 80 percent), zero otherwise. Either the Democrats or the Republicans will be elected. If your only concern is maximizing your average expected return, with no regard for risk, you should invest your $1,500 in:
a. ElephantInc.
b. neither DonkeyInc nor ElephantInc.
c. DonkeyInc.
d. either DonkeyInc or ElephantInc.

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Answers: 2

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