Ray Crofford Is Evaluating Investment Alternatives to Invest $100,000 Which $\quad$

question 23

Multiple Choice

Ray Crofford is evaluating investment alternatives to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's) for various market conditions. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\quad$$\text { Market Condition }$
$\begin{array}{|c|c|c|c|}\hline \text { Investment } & \text { Bull } & \text { Neutral } & \text { Bear } \\\hline \text { T-Bills } & 3 & 3 & 3 \\\hline \text { Stocks } & 21 & 11 & -30 \\\hline \text { Bonds } & 15 & 4 & -3 \\\hline \text { Mixture } & 13 & 6 & -10 \\\hline\end{array}$

For the combination of 'Bear' and 'Mixture', the opportunity loss is ______.

• A)0
• B)5
• C)13
• D)33
• E)-10

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Definitions:

Financial Analysis

Financial Analysis involves evaluating businesses, projects, budgets, and other finance-related entities to determine their performance and suitability.

Alternative Accounting Policies

Different methods and practices that a company can choose from to record its transactions and prepare its financial statements under the framework of accounting standards.

Other Comprehensive Income

Those revenues, expenses, gains, and losses under both GAAP and IFRS that are excluded from net income on the income statement.

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to evaluate if a stock is over or under-valued.