Exhibit 14.5 The Following Questions Are Based on the Information Below

question 82

Multiple Choice

Exhibit 14.5
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C, D. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following decision tree has been developed for the problem. The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%.
-In decision analysis, good decisions

• A) always result in good outcomes
• B) always result in bad outcomes
• C) guarantee good outcomes
• D) may be reached when the model accounts for unforeseeable circumstances

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Definitions:

Transform Boundary

A type of tectonic plate boundary where plates slide past each other horizontally, causing seismic activity.

Caribbean Region

A geographical area comprising the Caribbean Sea, its islands (including the West Indies), and the surrounding coasts located southeast of the Gulf of Mexico and the North American mainland.

Caribbean Plate

A mostly oceanic tectonic plate underlying Central America and the Caribbean Sea off the north coast of South America.

Transform Fault

A type of fault where two tectonic plates slide past each other horizontally, often associated with earthquakes.