Considering the Value of a Financial Instrument, the Circumstances Under

question 81

Multiple Choice

Considering the value of a financial instrument, the circumstances under which the payment is to be made influence the value because:

• A) we like uncertain payoffs because this adds to the return.
• B) payments that are made when we need them the most are more valuable.
• C) the sooner the payment is to be made the better.
• D) we know when certain events are going to occur and that is when we want the payment.

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Definitions:

Continuous Random Variable

A random variable that can take an infinite number of possible values.

Continuous Probability Distribution

A type of probability distribution where the possible outcomes form a continuum and can take on any value within a given range.

Probability Density Function

Probability density function is a function that describes the likelihood of a random variable to take on a given value, primarily used in continuous probability distributions.

Continuous Random Variable

A continuous random variable is a variable that can take an infinite number of values within a given range, representing quantities that can be measured, not just counted.