You Are Trying to Decide in Which of the Three

question 128

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 value of stock purchased under conditions of certainty is $1,675.
ii. The Expected value of stock purchased under conditions of certainty is $2,200.
iii. The Expected value of stock purchased under conditions of certainty is $1,150.

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

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Definitions:

Capital Gain Distributions

Payments to shareholders or fund investors from the sale of securities within the portfolio that have appreciated in value.

Income Distributions

Payments made from a fund or an entity to its shareholders, often derived from interest or dividend income.

NAV

Net Asset Value, the total value of a fund's assets minus its liabilities, often used to price each share of a mutual fund or ETF.

Capital Gain Distributions

Payments made to mutual fund shareholders from the fund's sale of securities that result in a capital gain.