question 5 (3 points) you have $100 to invest. option a is a high - risk stock with a 50% chance of doubling…

question 5 (3 points) you have $100 to invest. option a is a high - risk stock with a 50% chance of doubling your money and a 50% chance of losing it all. option b is a savings account with a guaranteed 3% return. which statement best describes the options? option b has a higher expected value and is safer option b is always better because its guaranteed option a is always better because it has a higher potential return option a has a higher expected value, but option b is safer

question 5 (3 points) you have $100 to invest. option a is a high - risk stock with a 50% chance of doubling your money and a 50% chance of losing it all. option b is a savings account with a guaranteed 3% return. which statement best describes the options? option b has a higher expected value and is safer option b is always better because its guaranteed option a is always better because it has a higher potential return option a has a higher expected value, but option b is safer

Answer

Brief Explanations:

First, calculate the expected value of Option A. The probability of doubling money ($200 outcome) is 0.5 and probability of losing all ($0 outcome) is 0.5. So, expected - value of Option A is (0.5\times200 + 0.5\times0=100). The expected value of Option B is (100\times(1 + 0.03)=103). Option B has a guaranteed return, making it safer.

Answer:

A. Option B has a higher expected value and is safer