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If you are risk-neutral (that is, neither seek out nor shy away from risk) which of the following options should you choose to maximize your

If you are risk-neutral (that is, neither seek out nor shy away from risk) which of the following options should you choose to maximize your expected return? (Hint: to calculate the expected return of an outcome, multiply the probability that an event will occur by the outcome of that event).

Complete the following table:

Option

Investment

Interest

Total Payoff

Probability

Expected Total Payoff

1

10,000

2%

10,000(1.02)=

1

2

10,000

5%

10,000(1.05)=

0.9

3

10,000

8%

10,000(1.08)=

0.93

4

10,000

0%

10,000(1.0) =

1

Which option would you choose? __________________

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