Scenario: Diversification Morris Is Considering Investing $10,000 in a Sunglass

question 125

Multiple Choice

Scenario: Diversification Morris is considering investing $10,000 in a sunglass company or a rain poncho company.If it is a rainy year and he invests only in the sunglass company, he expects to lose $5,000 at the end of the year.However, if it is a rainy year and he invests only in the rain poncho company, he expects to earn $10,000.If it is a sunny year and he invests only in the sunglass company, he expects to earn $10,000 at the end of the year; if he invests only in the rain poncho company, he expects to lose $5,000 in a sunny year.There is a 50% chance of a sunny year and a 50%
Chance of a rainy year.
(Scenario: Diversification) Based on the information in the scenario Diversification, if Morris invests half of his money in the sunglass company and half in the rain poncho company, what is his expected gain or loss?

• A)a loss of $2,500
• B)to break even
• C)a gain of $2,500
• D)a gain of $10,000

---

Definitions:

Internal Validity

The extent to which a study can demonstrate that a causal relationship exists between variables, without being influenced by external factors.

One-Group Pretest-Posttest Uninterpretable Design

Refers to a simplistic experimental design where a single group of subjects is tested before and after an intervention without a control group, making causal interpretations difficult.

Internal Validity

The extent to which a study can demonstrate a causal relationship between variables, free of confounding factors.

Random Assignment

is a process used in experimental designs to allocate participants to different groups in a study by chance, minimizing pre-existing differences among those groups.