There Are Three Stocks, A, B, and C,You Can Either

question 71

Multiple Choice

There are three stocks, A, B, and C,You can either invest in these stocks or short sell them.There are three possible states of nature for economic growth in the upcoming year (each equally likely to occur) ; economic growth may be strong, moderate, or weak.The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below:

• A)A, B and C
• B)B, A and C
• C)C, A and B
• D)A and B, C

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Definitions:

Petty Cash Account

A small amount of cash kept on hand for making immediate payments for miscellaneous small expenses.

Compensating Balance

A requirement by some banks requiring depositors to maintain minimum cash balances in their bank accounts.

Petty Cash Fund

A special cash fund to pay relatively small amounts.

Bank Checking Account

A bank account that allows individuals and businesses to deposit money and withdraw funds, which can be accessed using checks, automated teller machines (ATMs), and electronic debits.