First Fiddler's Bank Has Foreclosed on a Home Mortgage and Is

question 30

Multiple Choice

First Fiddler's Bank has foreclosed on a home mortgage and is selling the house at auction.There are three bidders for the house, Ernie, Teresa, and Marilyn.First Fiddler's does not know the willingness to pay of these three bidders for the house, but on the basis of its previous experience, the bank believes that each of these bidders has a probability of 1/3 of valuing it at $600,000, a probability of 1/3 of valuing at $500,000, and a probability of 1/3 of valuing it at $200,000.First Fiddler's believes that these probabilities are independent among buyers.If First Fiddler's sells the house by means of a second-bidder, sealed-bid auction (Vickrey auction) , what will be the bank's expected revenue from the sale? (Choose the closest option.)

• A)$433,333
• B)$448,148
• C)$600,000
• D)$500,000
• E)$200,000

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Definitions:

Time Periods

Specific intervals or durations used for accounting and reporting purposes, such as fiscal quarters or years.

Bank Loan

A sum of money lent by a bank to a borrower at an agreed interest rate.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances in temporary accounts to permanent accounts and prepare the company's books for the next period.

Statement of Income

A report detailing the earnings, expenses, and net profit of a business over a fiscal period, illustrating the financial performance.