Question

pany has a choice of three investment schemes. Option I gives a sure $25,000 on investment. Option II gives a 50% chance of returning $50,000 and a 50% 20. A com return ce of returning $10,000. Option III gives a 5% chance of returning $100,000 and a chan 95% chance of returning nothing, which option should the company choose? (A) Option II if it wants to maximize expected return (B) Option I if it needs at least $20,000 to pay off an overdue loan (C) Option II i it needs at least $80,000 to pay off an overdue loan (D) All of the above answers are correct. (E) Because of chance, it really doesn't matter which option it chooses.

Answer 1

I think so it may be the best option is option two he will get a sure returns of 25000$ this is the best option.

Regarding talking about option 2 it has depends on chance of 50% it is best only when the company which is investing is in best position we need much more information about the company so we can judge clearly.

Going to option 3 it has only 5% chances of returns of 100000$ it seems to be happy to get such returns but we can't believe in chances without knowing the strategy of the company.

So Answer is B seems to be some fitted to the above explanation.