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Suppose you are a corporate treasurer, and you manage the cash savings of your firm....

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Finance

  1. Suppose you are a corporate treasurer, and you manage the cash savings of your firm. You

dont want to lose any initial investment and wish to make a return higher than the risk-free rate

100 in one year: 100 (1 + 0.8 max , 0), i.e., this product guarantees you never lose a

in some cases. Your bank proposes a product that costs 100 and delivers the following payoff

penny and gives you 80% of gain if the stock price appreciates. Will you invest in this product?

Justify your answer with calculations.

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