Use the Following to Answer Questions

question 129

Multiple Choice

Use the following to answer questions :
Scenario: Health Costs
Alan is hoping for a healthy year,meaning that he would have zero health costs.Given his habits,there is a 40% chance that Alan will develop a health issue resulting in $50 000 in health costs.Assume these are the only two conditions that could exist for Alan in the coming year.
-(Scenario: Health Costs) Use Scenario: Health Costs.Given the fact that Alan has a 40% chance of developing a health problem,what is the expected value of Alan's health care costs for the coming year?

• A) $0
• B) $50 000
• C) $20 000
• D) $16 000

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Definitions:

Arbitrage

The simultaneous purchase and sale of an asset to profit from a difference in the price in two different markets.

Derivatives

Financial instruments whose value is derived from the value of an underlying entity such as an asset, index, or interest rate.

Corporate Form

Corporate form refers to the legal structure of an organization as a corporation, which is a legal entity distinct from its owners, with its rights, privileges, liabilities, and regulations.

Business Ownership

The legal right or status of possessing a company or trade, encompassing sole proprietorships, partnerships, corporations, and other entity structures.