You Are Trying to Decide in Which of the Three

question 109

Multiple Choice

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.5, which of the following statements
Are correct?
i. The Expected Opportunity Loss for Company A is $225.
ii. The Expected Opportunity Loss for Company B is $75.
iii. The Expected Opportunity Loss for Company C is $200.

• A) (i), (ii), and (iii) are all correct statements.
• B) (i) is a correct statement but not (ii) or (iii).
• C) (ii) is a correct statement but not (i) or (iii).
• D) (ii) and (iii) are correct statements but not (i).
• E) (i), (ii), and (iii) are all false statements.

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Definitions:

Consol

A type of perpetuity.

Future Values

The value of an asset or amount of money at a specified date in the future that is equivalent in value to a specified sum today.

Present Values

The process of determining the present worth of an amount or series of cash flows that will be received or paid in the future, using a specific discount rate.

Annuity Payment

A fixed sum of money paid to someone each period, typically for the rest of their life or for a fixed number of years.