The Table Below Presents Returns Across Three States of Nature

question 12

Multiple Choice

The Table below presents returns across three states of nature for two assets: Risky and Safe.The expected return on Safe is 8.4%.Which asset has a higher expected return?

• A) Risky
• B) Safe
• C) Both have the same expected return

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Definitions:

Accounts Receivable

Money that is owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Quick Ratio

A liquidity measure that indicates a company’s ability to pay its current liabilities without relying on the sale of inventory, calculated as (current assets - inventories) / current liabilities.

Liability Likelihood

Refers to the probability that a company will be responsible for payment due to a debt, claim, or lawsuit.

Interest Calculations

The process of determining the amount of interest owed or earned over a specific period of time, based on the principal amount and the rate of interest.