If You Ask a 5-Year-Old, "If You Had Three Cookies

question 47

Multiple Choice

If you ask a 5-year-old, "If you had three cookies and I gave you two more, how many cookies would you have altogether?", the child would

• A) be unlikely to be able to answer the question correctly.
• B) probably solve the problem by counting on his fingers.
• C) probably solve the problem by counting mentally.
• D) probably solve the problem by retrieving the answer from memory.

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Definitions:

Abandonment Option

A provision in a contract that allows a party to withdraw from the contract before the completion or maturity date.

Monte Carlo Simulation

A computational technique that uses random sampling and statistical modeling to estimate mathematical functions and mimic the operation of complex systems.

Probability Distributions

Probability distributions describe the likelihood of different outcomes in a stochastic process or experiment.

NPV

NPV, or Net Present Value, is a financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to gauge the profitability of an investment.