Frank Forgione Has the Right to Enter a Contest Where

question 21

Multiple Choice

Frank Forgione has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $25,000, he is ___.

• A)a risk avoider
• B)an optimist
• C)a risk taker
• D)risk neutral (an EMV'er)
• E)a gambler

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Definitions:

Cost of Debt

The effective rate that a company pays on its current debt, often reflected as an annual rate.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividends paid to shareholders, projected into the future.

Equity Financing

Raising capital through the sale of shares in a company.

Tax Rate

The proportion of taxable income that an entity is legally required to remit to the government, with different rates applied to different levels of income or different types of entities.