Question
Ginny is endowed with $10 million and is deciding whether to invest in a restaurant. Assume perfect capital markets with an interest rate of 6%.
Ginny is endowed with $10 million and is deciding whether to invest in a restaurant. Assume perfect capital markets with an interest rate of 6%.
Investment option Investment (millions) End of Year CFs(millions)
1 1 1.8
2 2 3.3
3 3 4.4
4 4 5.4
- List 4 perfect capital market assumptions.
1. _ ______
2. _ ______
3. ______
4. _ ______
- Which investment option should Ginny choose?
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Derivatives Markets
Authors: Robert McDonald
3rd Edition
978-9332536746, 9789332536746
