A New Business Opportunity Has a 70% Chance of Being

question 48

Multiple Choice

A new business opportunity has a 70% chance of being worth $500,000 next year and a 30% chance of being worth $100,000. The appropriate expected rate of return is 10%.
-Refer to the information above. This new opportunity will be financed with a $150,000 loan. What will the lender's rate of return be if the business opportunity returns only $100,000 next
Year?

• A)0.0%
• B)-33.3%
• C)+1.5%
• D)none of the above

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Definitions:

Points A and B

Usually refers to specific positions or locations within a graph or model used in economic analysis and decision-making.

Units Per Period

A metric that indicates the quantity of production, sales, or any other measurable activity within a specified timeframe.

Marginal Product

The increase in output that results from employing one more unit of a specific input, holding all other inputs constant.

Bushels

A unit of volume that is used in the United States for measuring agricultural products, such as grains.