Bob Is a Contestant on a Trivia Quiz Show

question 81

Multiple Choice

Bob is a contestant on a trivia quiz show.For every state capital he can correctly identify,he will win $1,000.However,before identifying any capitals,he must decide how many he thinks he can correctly identify.If he cannot identify as many as he has wagered,Bob will not win any money.Suppose Bob says that he can correctly identify 42 state capitals for a potential payoff of $42,000.According to studies of human decision-making,what is most likely to happen?

• A) Bob will be able to identify 42 state capitals and he will win $42,000.
• B) Bob will be able to identify fewer than 42 state capitals and will not win any money.
• C) Bob will not be able to identify any state capitals and will not win any money.
• D) Bob will choose to save all of the money he wins on the quiz show for his retirement.

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Definitions:

Ratio

The expression of a financial statement item or set of items as a percentage of another financial statement item in order to measure an important economic relationship as a single number.

Solvency

The ability of an entity to meet its long-term financial commitments and debts as they come due.

Liquidity

A measure of how quickly and easily an asset can be converted into cash without significantly affecting its price.

Profitability

A measure of the efficiency and success of a business in generating profits from its operations over a period of time.