A Retailer Is Deciding How Many of a Certain Product

question 29

Multiple Choice

A retailer is deciding how many of a certain product to stock. The historical probability distribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $8 per unit and sells for $25 per unit. The conditional value for the decision alternative "Stock 3" and state of nature "Sell 1" is

• A) 1.4 units
• B) $1 profit
• C) $25 profit
• D) $-8 profit
• E) none of the above

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Definitions:

Sale of Bonds

The process by which a company or government issues bonds to investors in order to raise capital, effectively borrowing from the bond purchasers.

Interest

The cost of borrowing money or the return on invested funds, expressed as a percentage of the principal amount.

Long-Term Investments

Investments held by a company that are intended to be kept for more than one year, such as stocks, bonds, or real estate, potentially generating income or appreciating in value.