Which of the Following Statements Is Incorrect

question 26

Multiple Choice

Which of the following statements is incorrect?

• A)A risk-averse decision maker will choose the alternative with the lowest variance among alternatives with identical expected utilities.
• B)A risk-neutral decision maker will always choose the alternative with the lowest variance among alternatives with identical expected utilities.
• C)A risk-loving decision maker will choose the alternative with the highest variance among alternatives with identical expected utilities.
• D)The expected utility of a lottery is the expected value of the utility levels that the decision maker receives from the payoffs in the lottery.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards for financial reporting in the U.S.

Acquisition Method

An accounting technique used in consolidating the financial statements of a group in which one controls one or more others, focusing on fair value of the acquired assets and liabilities.

Stock Contingency

Relates to conditions or events that must occur before the issuance of stock can happen or conditions affecting a stock’s status.