The Expected Value of an Investment

question 99

Multiple Choice

The expected value of an investment:

• A) is what the owner will receive when the investment is sold.
• B) is the sum of the payoffs.
• C) is the probability-weighted sum of the possible outcomes.
• D) cannot be determined in advance.

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Definitions:

Retained Earnings

The portion of net income not distributed as dividends to shareholders but retained by the company for reinvestment in its core business, or to pay debt.

Common Stock

A type of equity ownership in a corporation, where holders have voting rights and potentially receive dividends.

Capital Surplus

funds raised by a company through issuing shares at a price above their par value.

Marginal Tax Rates

The rate of tax applied to your next dollar of income, indicating the percentage of tax imposed on additional income.