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# Imagine you have $24,000 and you are willing to invest. You have two choices: a) A safe investment that promises to pay 5% profit after 1 year.

Imagine you have $24,000 and you are willing to invest. You have two choices:

a) A safe investment that promises to pay 5% profit after 1 year.

b) A risky investment that has a 25% chance you might loose ** half** of your money.

1) How much do you expect to get paid for a year in the second investment to be indifferent between two investment choices? (the two investments have the same Expected Profit)

2)What is the Risk Premium in the second choices?