Question

A father on birthday of his daughter give two option to choose:
option 1 : he will transfer $100 to her bank account where she get guarnted 10% return .
option 2: he would give $100 for trading in stock market where she has 10% chance to get $500 , 30 % chance to get $200 and 50% chance to loss her invested money.
So which option she should opt so as to maximize her profit.

Answer 1

Always do the stock market.

Answer 2

I want the logic behind answer whatever option she opt

Answer 3

The value of the first option after a year is $110.

The value of the second is 0.1 x 500 + 0.3 x 200 + 0.5 x 0 + 0.1 x something else because your percentages only add up to 90.

Anyway this adds up to 50 +60 + 0 +10% of something and that is greater than $110 and therefore that is what she should do.

Answer 4

missing something here