A $600 Investment Has the Following Payoff Frequency: a Quarter

question 10

Multiple Choice

A $600 investment has the following payoff frequency: a quarter of the time it will be $0; three quarters of the time it will pay off $1000. Its standard deviation and value at risk respectively are:

• A) $750; $600
• B) $433; $600
• C) $0; $1,000
• D) $433; $1,000

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Definitions:

Accounts Payable

Accounts payable is an accounting term for the outstanding bills or debts a company owes to suppliers or vendors for goods or services received.

Operating Cycle

The operating cycle is the amount of time it takes for a company to purchase inventory, sell it to customers, and collect the cash from these sales, reflecting the efficiency of a company's operations.

Accounts Receivable Period

The average number of days that a company takes to collect payments from its credit sales.

Inventory Period

The duration of time it takes for a company to turn its inventory into sales, typically measured in days.