Mel Is Thinking of Going on a Cruise

question 75

Multiple Choice

Mel is thinking of going on a cruise.Mel values a cruise in nice weather at $2,000 and values a cruise in bad weather at $50.According to a very reliable source,the probability of nice weather is 60% and the probability of bad weather is 40%.Trip insurance is sometimes available.If purchased,it allows travelers to delay the cruise until the weather is nice.
If a gamble has an expected value of $10,then one can predict that

• A)only risk-averse persons will take the gamble.
• B)no risk-averse person will take the gamble.
• C)all risk-neutral persons will take the gamble.
• D)the gamble never pays off more than $10.

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Definitions:

Supplies

Items used in the day-to-day operations of a business, such as office supplies, which are essential for conducting business activities.

Inventory

The cumulative inventory of products and materials retained by a business for selling or for use in manufacturing.

Unearned Rent Revenue

Represents income received by a property owner for which the services (rental period) have not yet been provided.

Cash

Money in the form of currency that can include banknotes and coins, held in the immediate possession of or in bank accounts for the entity.