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An entrepreneur is having $500 as initial capital with two investment options available: Option 1: invest at a market interest rate of 10% Option 2:

An entrepreneur is having $500 as initial capital with two investment options available: Option 1: invest at a market interest rate of 10% Option 2: invest in an investment scheme that generates a return based on the transformation function of K = x2 , where K is the return at time 2 and x is the invested fund at time 1. Calculate the optimal fund should be allocated into these options at time 1. (5 marks)

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