Which of the Following Best Describes a Risk-Averse Individual

question 17

Multiple Choice

Which of the following best describes a risk-averse individual?

• A)He would rather spend all his money than risk it in investments.
• B)He would rather put $100 in a bank account earning 10 percent than in a one-year government bond earning 10 percent.
• C)He would rather have $10 in his pocket than gamble on a coin toss in which heads yields $20 and tails yields nothing.
• D)He would rather put $100 in a bank at 10 percent interest than in a stock with a 10-percent dividend and 50-50 chance of a 25-percent increase or decrease in the value of the stock.
• E)He does not trust banks.

Know the accounting entries for stock subscriptions and their down payments.

Understand the implications of dividends in arrears on preferred stock.

Grasp the accounting treatments and financial statement impacts of stock splits and stock options (both compensatory and noncompensatory).

Understand the principles of stock appreciation rights (SARs) compensation plans and their measurement and exercise dates.

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Definitions:

Delphi Technique

The Delphi Technique is a forecasting method involving iterative rounds of questionnaires sent to a panel of experts, the results of which are aggregated and shared with the panel until a consensus is reached.

Nominal Group Technique

A structured method for group brainstorming that encourages contributions from everyone in the group to identify and solve problems.

Scenario Planning

A strategic planning method used to make flexible long-term plans based on varying assumptions about future conditions.

Quantitative Model

A mathematical model that represents systems using numerical parameters to predict and analyze their behavior under different scenarios.