Use the Information for the Question(s)below

question 45

Multiple Choice

Use the information for the question(s) below.
JR Industries has a $20 million loan due at the end of the year and under its current business strategy its assets will have a market value of only $15 million when the loan comes due.JR is considering a new much riskier business strategy.While this new riskier strategy can be implemented using JR's existing assets without any additional investment,the new strategy has only a 40% probability of succeeding.If the new strategy is a success,the market value of JR's assets will be $30 million,but if the strategy fails the assets will be worth only $5 million.
-What is the overall expected payoff under JR's new riskier business strategy?

• A)$4 million
• B)$11 million
• C)$20 million
• D)$15 million

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Definitions:

Test Statistic

A calculated value used in statistical testing to determine whether to reject the null hypothesis.

P-Value

The probability of observing test results at least as extreme as the results actually observed, under the assumption that the null hypothesis is correct.

Degrees of Freedom

The number of independent values or quantities that can vary in the calculation without violating any constraint.

Contingency Table

A tabular method used to summarize the relationship between several categorical variables, showing distribution of frequencies.