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Part $1$

Suppose you have just inherited $$$$10$ comma $200$

and are considering different options for investing the money to maximize your return.

If you are$$ risk$-$neutral $($that$$ is$,$ neither seek out or shy away from$$ risk$),$ which of the following options should you choose to maximize your expected$$ return?

A$.$

Loan the money to one of your$$ friends' roommates,$$ Mike, at an agreed upon interest rate of $7$

$\%,$

but you believe there is a $6$

$\%$

chance that Mike will leave town without repaying you.

B$.$

Invest the money in a corporate$$ bond, with a stated return of $6$

$\%,$

but there is a chance of $10$

$\%$

the company could go bankrupt.

C$.$

Put the money in an$$ interest$-$bearing checking$$ account, which earns $2$

$\%.$

The FDIC insures the account against bank failure.

D$.$

Hold the money in cash and earn zero return