Your neighbor asks you to invest $500 at 5 percent interest in her catering business. She insists that with all the working parents in the neighborhood, a business that provides home-cooked meals has the potential for making huge profits. You want to invest but are concerned because your neighbor has not had any business experience. How can you offset your risk?

Question

Business

Simon Mckee

13 June, 15:41

Your neighbor asks you to invest $500 at 5 percent interest in her catering business. She insists that with all the working parents in the neighborhood, a business that provides home-cooked meals has the potential for making huge profits. You want to invest but are concerned because your neighbor has not had any business experience. How can you offset your risk?

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Answers (1)

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Garrett Dorsey · Answer 1

Answer: Ask for a higher interest rate

Explanation:

The best way to offset the risk is to ask for a higher interest rate which is more than the five percent that is proposed by my neighbor.

Even though I want to invest in her catering business, her lack of experience in the catering business is of concern to me, hence, I've to settle for a higher percentage than the percentage which she proposed.