Amanda Recently Graduated from College,and She Has a Job Offer

question 6

Multiple Choice

Amanda recently graduated from college,and she has a job offer with uncertain income.There is a 70% probability that she will make $10,000 and a 30% probability that she will make $70,000.Suppose Amanda is offered another job with a certain income.All else equal,if she has a constant marginal utility of income,she will accept the second job offer only if it pays more than:

• A)$40,000.
• B)$28,000.
• C)$10,000.
• D)$21,000.

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Definitions:

Dividend Per Share

The total dividends declared or paid by a company divided by the current number of outstanding shares.

Trading Securities

Financial assets that are bought and sold with the intention of generating profits from short-term price fluctuations.

Fair Value

An estimate of the price at which an asset or liability could be traded in a fair transaction between willing parties, other than in a forced or liquidation sale.

Cost Method

An accounting method used to record investments, where the investment is recorded at its acquisition cost without recognizing periodic gains or losses.