A Manager Is Attempting to Assess the Probability of a Recession

question 132

Multiple Choice

A manager is attempting to assess the probability of a recession ending in the next six months, and its impact on expected profitability.The manager believes there is 75 percent chance the recession will end in six months and profits will return to $400 million.However, there is a 25 percent chance the recession will not end in six months resulting in a $5 million loss.The expected profits over the next six months are

• A)$298.75 million.
• B)$301.25 million.
• C)$395 million.
• D)$405 million.

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Definitions:

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