You Are Trying to Decide in Which of the Three

question 111

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 $1,980.
ii. The Expected value of perfect information is $75.
iii. The Expected value of perfect information is $180.

• 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) and (ii) are correct statements but not (iii).

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Definitions:

Discounted

A reduction applied to the regular price of products or services, often used as an incentive for customers.

Maturity Value

The amount payable to the holder of a financial instrument at its maturity date, including principal and any accrued interest.

365-Day Year

A calendar assumption that treats each year as having 365 days for calculating interests or other daily based computations.

Leap Years

Years in which an extra day is added to the calendar (February 29) to keep the calendar year synchronized with the astronomical year.