Question
Imagine the following scenario where you need to decide which MUTUALLY-EXCLUSIVE project to pursue: You are given $50,000 to invest in one of the following
Imagine the following scenario where you need to decide which MUTUALLY-EXCLUSIVE project to pursue: You are given $50,000 to invest in one of the following two projects (you CANNOT invest in both).
Project A: A highly respectable local entrepreneur reaches out to you for a short-term loan of $10,000 guaranteeing a return of $16,000 in 15 days ($6,000 of profit). The situation is unusual as her customers lost their financing source and will need about 2 weeks to wire her the money. Everything is insured and guaranteed so there is ZERO risk of losing your money if you decide to give her the loan.
Project B: A large local utility company sells community bonds with a minimum of $50,000 and promising 15% interest at the end of one year. Calculate the annualized return for project A. Which project (A or B) would you invest in? Why?
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