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91% Search in Sheet Home Layout Tables Charts SmartArt Formulas Data Review Edit Font Alignment Number Cells Themes || Fill : Arial Wrap Text General 2096-Accent! Paste Clear Insert Delete Format . Themes AA" Formattin M14 There are two investment opportunities named A and B. You are given $100,000 to invest in one of these opportunities. Which investment opportunity would you prefer to invest your $100,000? State why? Investment A Growth Assume 2.50 2.00 1.50 1.00 1. You must invest only in one opportunity. No diversification is allowed in this case. 2. You can and should invest all $100,000 3. Both investments continue to perform about the same as they did in the previous 6 months 4. Both investments have about the same level of risk 10 5. You wish to maximize the return on your investment 12 13 Chart Area Investment Duration in Months 15 16 17 18 19 20 Investment B Growth 21 23 24 25 26 27 28 29 30 31 32 B Value 34 35 36 37 38 39 40 Investment Duration in Months 42 46 48 49 RAHSheeti Normal View password Ready Sum- 0Explanation / Answer
Answer
Investment A Growth: Total Investment value increases from $ 1.5 million to $ 3 million in 6 months. (i.e. 100 % return in 6 months).
Investment B Growth: Total Investment value increases from $ 2.5 million to $ 5 million in 6 months (i.e. 100% return in 6 months).
So Investment in both funds gives same return over 6 months but if you see graph of increase in investment value of both funds, Graph of increase in investment value of Investment B Growth Fund is more steeper (i.e. rising sharply) than graph of increase in investment value of Investment A Growth fund. So return on investment is higher for Investment B Growth Fund in initial 3 months than Investment A Growth fund.
So Investment of $100,000 in Investment B Growth Fund gives more return in shorter duration period than in Investment A Growth fund. So in scenario of early withdrawal of investment, Investment B Growth Fund is better.
So I will prefer Investment B Growth Fund.
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