Answer it first: the answer and the solution appear right after.
Questions on this set: Q6 Q7
Answer the next 2 questions based on the information given below.
Shabnam is considering three alternatives to invest her surplus cash for a week. She wishes to guarantee maximum returns on her investment. She has three options, each of which can be utilized fully or partially in conjunction with others.
Option A: Invest in a public sector bank. It promises a return of +0.10%
Option B: Invest in mutual funds of ABC Ltd. A rise in the stock market will result in a return of +5%, while a fall will entail a return of –3%
Option C: Invest in mutual funds of CBA Ltd. A rise in the stock market will result in a return of –2.5%, while a fall will entail a return of +2%
What strategy will maximize the guaranteed return to Shabnam?
Answer: B
As shown by the table formulated in the first question, maximum returns are guaranteed by investing 36% in option B and 64% in option C.
Hence, option (b).
