Assume That Two Investment Opportunities Have Identical Expected Values of $100,000

question 37

Multiple Choice

Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B's variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity:

• A) A because it has less risk.
• B) A because it provides higher potential earnings.
• C) B because it has less risk.
• D) B because of its higher potential earnings.

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Definitions:

Binding Price Ceiling

A maximum legal price set below the equilibrium price, leading to shortages as demand exceeds supply.

Equilibrium Level

A situation where the balance between the market's supply and demand stabilizes prices.

Increase Efficiency

The process of improving the effectiveness of an operation, system, or process by maximizing output with the minimal amount of input or effort.

Super Bowl

The annual championship game of the National Football League (NFL) in the United States, known for its significant viewership and elaborate halftime shows.