Question
5) A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. The risk-free rate is 7.5%. Each asset is expected to
5) A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. The risk-free rate is 7.5%. Each asset is expected to provide earnings over a three-year period as described below. Asset 1: 21,000; 25,000; 16,000; Asset 2: 19,000; 15,000; 11,000; Asset 3: 13,000; 20,000; 19,000; and Asset 4: 10,000; 12,000, 20,000. Based on the profit maximization goal, the financial manager would choose ., based on the time value of money, the manager should choose , while based on the riskiness under rational expectations theory should choose .
A) Asset 2; Asset 3; Asset 4.
B) Asset 2; Asset 1; Asset 3.
C) Asset 1; Asset 3; Asset 1
D) Asset 4; Asset 1; Asset 2.
E) Asset 1; Asset 2; Asset 3
F) Asset 2; Asset 4; Asset 3.
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