Use the Following Decision Tree to Answer the Next Question

question 15

Multiple Choice

Use the following decision tree to answer the next question.

-If the probability of Event 1 is 30% and the probability of Event 2 is 70% in the decision tree above, the expected value of Decision 1 is

• A)-10
• B)30
• C)14.5
• D)18

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Definitions:

Levered Investment

Levered Investment involves using borrowed funds in addition to one's own investment capital to enhance the potential return of an investment.

Long Stock Position

The ownership of shares in a company with the expectation that they will increase in value over time.

Russell 2000

An index measuring the performance of approximately 2000 small-cap companies in the United States.

Large-cap Indexes

Large-cap Indexes track the performance of stocks from companies with large market capitalization, reflecting the overall health and trends of major corporations.