You Have a Decision to Invest $10,000 in Any of Four

question 6

Multiple Choice

You have a decision to invest $10,000 in any of four different companies. You estimate the probabilities that the economy will be favourable or unfavourable and you estimate the percent returns over the next year. Based on the maximin criterion, what is the choice?

• A) Company 1
• B) Company 2
• C) Company 3
• D) Company 4

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Definitions:

Dividends Per Share

The total amount of dividends declared by a company for each share of its stock, indicating the income investors receive from holding shares in the company.

Financial Leverage

The use of borrowed funds to increase one's investment potential, which can magnify both gains and losses.

Current Assets

Short-term assets that are expected to be converted into cash within one year.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the net worth attributable to shareholders.