Use the Information Given Below to Answer the Following Questions)

question 19

Multiple Choice

Use the information given below to answer the following questions) . Below is a payoff table that lists three mortgage options: $$\begin{array} { | l | l | l | l | } \hline & { \text { Outcome } } \\\hline \text { Decision } & \text { Rates Rise } & \text { Rates Stable } & \text { Rates Fall } \\\hline \text { 2-year ARM } & \$ 66,645 & \$ 43,650 & \$ 38,560 \\\hline \text { 5-year ARM } & \$ 62,857 & \$ 47,698 & \$ 42,726 \\\hline \text { 25-year fixed } & \$ 52,276 & \$ 52,276 & \$ 52,276 \\\hline\end{array}$$
-What is the maximum opportunity loss incurred for the 5-year ARM?

• A) $ 8,626
• B) $ 13,716
• C) $ 14,369
• D) $ 10,581

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Definitions:

Alpha

Often used to denote the level of significance in hypothesis testing, typically set at 0.05.

Likelihood

A measure of the probability that an observed set of data would occur under a particular statistical model or hypothesis.

Sample Size

The number of subjects or units included in a study or experiment, impacting the validity and reliability of the statistical analysis.

Research Hypothesis

A statement made by researchers when they speculate upon the outcome of a research or experiment.