46. List of all possible outcomes and the corresponding probabilities of occurre

Question

46. List of all possible outcomes and the corresponding probabilities of occurrence is called: a. possible events.
b. probability distribution
c. possible events and probabilities.
d. payoff matrix.

47. A project with a 80% chance of earning $4,000 in profit and a 20% chance of earning $12,000 in profit has an expected value of:
a. $5,600
b. $10,000
c. $16,000
d. $6,000

48. An investor who displays an increasing marginal utility of money is characterized as:
a. risk loving.
b. risk neutral.
c. risk averse.
d. insufficient information to determine.

49. A manager has personal certainty equivalent adjustment factor ? = 0.6. What can we conclude that the manager is:
a. risk-neutral.
b. risk-averse.
c. risk-preferring.
d. risk-seeking.

50. If expected return = $500,000, only a risk-seeking investor would make a certain sum investment in an amount:
a. less than $500,000.
b. of $500,000.
c. greater than or equal to $500,000.
d. greater than $500,000.

Explanation / Answer

46. List of all possible outcomes and the corresponding probabilities of occurrence is called:

Probability distribution

47. A project with a 80% chance of earning $4,000 in profit and a 20% chance of earning $12,000 in profit has an expected value of:

= 0.8(4000) + 0.2(12000) = 3200 + 2400 = 5600 $

48. An investor who displays an increasing marginal utility of money is characterized as:

is risk seeking or risk loving.

49. A manager has personal certainty equivalent adjustment factor ? = 0.6. What can we conclude that the manager is:

a = 0.6

a < 1

Hence manager is Risk-averse

50. If expected return = $500,000, only a risk-seeking investor would make a certain sum investment in an amount:

i.e greater than or equal to $500,000

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