Guide her in trade off between return and risk so that she makes a decision in choosing investments?

Section C (4 Mark)

Read the senario and answer to the question.

If Mrs. Deepika, a conservative investor, has Rs. 50, lakhs today that she could invest for the next three months in a three month bank CD or in a stock. The bank CD offers a guaranteed return 6 % over the three-month period. Alternatively she thinks the price of the stock will rise by 5% over the next months. She is confused in taking the decision.

Guide her in trade off between return and risk so that she makes a decision in choosing investments?
A . As the return on stock is higher in next 3 months she should decide to invest in stock.
B . The future price of the stock is uncertain, her return from investing in this stock is also uncertain. The return could be less than 5% and might be even negative. But in Bank CD return is guaranteed. So as a conservative investor she should decide of invest in the Bank C
D . For making a balance trade off between return and risk she should invest 50% in each investment
E . Option B and C

Answer: B