A Decision Tree Shows a 30% Probability of $2 Million

question 85

Multiple Choice

A decision tree shows a 30% probability of $2 million in returns and a 70% chance of $1 million in returns. What is the maximum you would invest today in this project if the cash inflow occurs one year in the future and the discount rate is 10%?

• A) $818,181.82
• B) $1,181,818.18
• C) $1,300,000.00
• D)$1,430,000.00

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Definitions:

Self-Enhancing Bias

is the tendency to overestimate one's own abilities or attributes and view oneself in an overly favorable light.

Self-Comparison Bias

The tendency to make favorable comparisons between oneself and others, which can lead to an inflated sense of self-esteem or competence.

Global Self-Esteem

Refers to the overall value that one places on oneself as a person, integrating beliefs and feelings from various aspects of self-concept into a single self-assessment.