An Investor Estimates the Expected Return of Option a to Be

question 6

Multiple Choice

An investor estimates the expected return of option A to be $180,000 and its expected utility to be 400.The expected return of option B is $120,000,and its expected utility is 450.The investor should:

• A)select option A because it has the higher expected return.
• B)select option B because it has the higher expected utility.
• C)select option A because 180,000/120,000 > 450/400.
• D)be indifferent between option A and option B.
• E)re-analyze the values of expected returns.

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Definitions:

Moral Hazard

An instance where an individual or group is inclined to partake in high-risk activities, reassured by the fact that any resultant costs will be absorbed by a different party.

Monitoring Solution

A system or tool used to continuously check and report on the performance or status of a process, network, or system.

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Online platforms that allow users to create personal profiles, interact with friends and family, and share content and experiences.

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Projects that are capable of succeeding or surviving, especially in terms of profitability or development.