Use the Below Information to Answer the Following Questions) -What Is the Expected Opportunity Loss for the 30-Year Fixed

question 41

Multiple Choice

Use the below information to answer the following questions) . Below is a payoff table with three mortgage options: $$\begin{array} { | l | l | c | c | } \hline & &{ \text { Outcame } } \\\hline \text { Probability } & { 0.6 } & { 0.3 } & { 0.1 } \\\hline \text { Decision } & \text { Rates Rise } & \text { Rates Stable } & \text { Rates Fall } \\\hline \text { 1-year ARM } & \$ 66,645 & \$ 43,650 & \$ 38,560 \\\hline \text { 3-year ARM } & \$ 62,857 & \$ 47,698 & \$ 42,726 \\\hline \text { 30-year fixed } & \$ 52,276 & \$ 52,276 & \$ 52,276 \\\hline\end{array}$$
-What is the expected opportunity loss for the 30-year fixed decision?

• A) $ 7,979.60
• B) $ 3,959.40
• C) $ 6,853.50
• D) $ 8,621.40

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Definitions:

Significant Influence

A level of control in an investment relationship, generally assumed to exist if the investor holds 20% to 50% of the voting stock of the investee company.

Outstanding Voting Common Stock

Shares of common stock that are held by investors, excluding those owned by the company itself, which have voting rights.

Amortization

The process of spreading the cost of an intangible asset over its useful life.

Inventory Costing

Methods for assigning costs to inventory and to the cost of goods sold, such as FIFO (First-In, First-Out) or LIFO (Last-In, First-Out), impacting financial statements.