Directions for the following two questions: Shabnam is considering three alternatives to invest her surplus cash for a week. She wishes to guarantee maximum returns on her investment. She has three options, each of which can be utilized fully or partially in conjunction with others.
Option A: Invest in a public sector bank. It promises a return of +0.10%.
Option B: Invest in mutual funds of ABC Ltd. A rise in the stock market will result in a return of +5%, while a fall will entail a return of – 3%.
Option C: Invest in mutual funds of CBA Ltd. A rise in the stock market will result in a return of – 2.5%, while a fall will entail a return of + 2%.
What strategy will maximize the guaranteed return to Shabnam?
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