(Scenario: Diversification)Use Scenario: Diversification

question 124

Multiple Choice

(Scenario: Diversification) Use Scenario: Diversification.If Morris invests half of his money in the sunglass company and half in the rain poncho company,what is his expected gain or loss? Scenario: Diversification
Morris is considering investing $10,000 in a sunglass company or a rain poncho company.If it is a rainy year and he invests only in the sunglass company,he will lose $5,000.However,if it is a rainy year and he invests only in the rain poncho company,he will earn $10,000.If it is a sunny year and he invests only in the sunglass company,he will earn $10,000;if he invests only in the rain poncho company,he will lose $5,000 in a sunny year.There is a 50% chance of a sunny year and a 50% chance of a rainy year.

• A)a loss of $2,500
• B)to break even
• C)a gain of $2,500
• D)a gain of $10,000

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Definitions:

Unaudited

Describes financial statements or reports that have not undergone a formal examination and verification process by an external auditor.

Quarterly Financial Statements

Financial reports that are issued after every three months by a corporation, providing a snapshot of its financial health.

Securities & Exchange Commission

A federal agency in the United States tasked with overseeing the securities markets and safeguarding the interests of investors.

Internal Auditors

Professionals who conduct audits within an organization to evaluate its various operations and controls for efficiency and compliance.