Firm X Is Considering a Project and Its Analysts Have

question 14

Multiple Choice

Firm X is considering a project and its analysts have projected the following outcomes and their probabilities. What is the expected value of the outcomes?

• A) $3,123
• B) $8,460
• C) $8,873
• D) Cannot be determined/depends upon which prediction is correct

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Definitions:

Arbitrage

A trading strategy that exploits price differences of identical or similar financial instruments on different markets or in different forms.

Derivatives Market

A market where financial instruments derived from other assets are bought and sold.

Stock Exchanges

Marketplaces where stocks and other securities are bought and sold, functioning as a platform for companies to raise capital and for investors to trade.

NASDAQ

An international e-marketplace dedicated to the buying and selling of securities, which also acts as the benchmark for U.S. tech stocks.