A Risk-Free Investment of $10,000 Will Return 8

question 14

Multiple Choice

A risk-free investment of $10,000 will return 8%. A risky $10,000 investment has a 50% chance of defaulting and returning only $3,000. What is the expected rate of return on the risky
Investment?

• A)+5.40%
• B)-0.54%
• C)-31.00%
• D)-46.00%

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Definitions:

P-Value

The probability of obtaining a test statistic at least as extreme as the one observed during a test, assuming the null hypothesis is true.

Rejection Rules

Guidelines used in hypothesis testing that determine the circumstances under which the null hypothesis should be rejected.

P-Value

Assuming the null hypothesis is applicable, it refers to the chance of recording test results that are at least as notable as the ones actually experienced.

Level Of Significance

The probability of rejecting the null hypothesis when it is actually true, often denoted by alpha (α).