You Are the Manager of a Company That Has an Equal

question 7

Multiple Choice

You are the manager of a company that has an equal chance of earning either $20,000 or $40,000 before taxes.Your firm is subject to a 20% tax rate on the first $30,000 and 35% on all income earned beyond that point.If you are offered a costless hedge to achieve guaranteed before tax earnings of $30,000,what is the expected benefit to hedging?

• A) $24,000
• B) $23,250
• C) $750
• D) none of the above

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Definitions:

Egalitarian

Advocating for or based on principles of equal rights and opportunities for all individuals.

Heterosexual Power

A concept pertaining to the societal dominance and privileges often associated with heterosexual individuals.

Promiscuous

Engaging in multiple sexual relationships or activities with little or no commitment or emotional connection.

Effeminate

A term often used pejoratively to describe a man displaying characteristics traditionally associated with femininity.