$\text { Investment }$ $\quad$ $\quad$

question 10

Multiple Choice

$\text { Investment }$ $\quad$$\quad$$\quad$$\quad$$\text { A }$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { B }$
\begin{array}{|l|l|l|l|l|}\hline\\begin{array}{l}\text { State } \\\text { description }\end{array} & \text { Bad state } & \text { Good state } & \text { Bad state } & \text { Good state } \\\hline \text { Probability } & 0.5 & 0.5 & 0.5 & 0.5 \\\hline \text { Payoff } & 200 & 220 & 400 & 435 \\\hline\end{array}
-Assume an investor has log utility.The investor faces a choice between an asset with a utility of 6.250 and an investment that will pay $500 in a bad state and $525 in a good state (as there are only two possible future states) .What does the probability of the good state need to be for the investor to be indifferent between the assets?

• A) \( 0.271 \)
• B) \( 0.306 \)
• C) \( 0.704 \)
• D) \( 0.729 \)

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Definitions:

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Special Incentives

Additional rewards or benefits offered to motivate or encourage a specific action or behavior from customers or employees.

Value Cocreation

Value cocreation is a business strategy that emphasizes the involvement of customers, suppliers, and other stakeholders in the development process of products or services, leading to enhanced value for all parties.

Production-oriented Era

A period in business history when the focus was on production efficiency and product capabilities rather than on understanding the needs and preferences of consumers.