High Interest Investment

HW help 10pts: Stock investment and US treasury bond?

Is a stock that has a 15% expected rate of return and a expected dollar profit of $75,000 a better investment than a US treasury bond with a 7.5% expected rate of return and has a $37,500 expected profit? Would you invest in the bond or stock and why? How large would the expected profit or expected rate of return on the stock have to be in order for you to accept it instead of the bond?

Public Comments

1. It depends on your risk tolerance. When the bond matures, the return is guaranteed. But the stock's return is not guaranteed and its market value could drop significantly.