Suppose That There Is a 25% Chance That an Investment

question 33

Multiple Choice

Suppose that there is a 25% chance that an investment of $1,000 will rise in value to $1,400,a 25% chance that the investment will remain at $1,000,and a 50% chance that the investment will fall in value to $500.The government introduces a 50% tax on returns to investment and allows a deduction against taxable income for any losses (assume that the tax rate is 50%) .What is the expected return on the investment?

• A) -$75
• B) -$125
• C) $85
• D) $150

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Definitions:

Target Gene

A specific gene that is affected by a particular action or process, such as the binding of a regulatory protein or the action of a drug.

Gene Therapy

Treating a genetic defect or disorder by transferring a normal or modified gene into the affected individual.

SCID-X1

A severe immune system disorder known as X-linked severe combined immunodeficiency, primarily affecting males, where the body is unable to defend itself against bacteria, viruses, and fungi.

Leukemia

A type of cancer that affects the blood and bone marrow, characterized by the overproduction of abnormal white blood cells.