Bill Owns an Export Business

question 15

Multiple Choice

Bill owns an export business.The expected profit from his business is $100,000 a year.For every 1% increase in the value of the Japanese yen relative to the dollar, its profits increase by $20,000.Bill plans to buy one of two firms.One is an import business which returns an expected profit of $70,000.For every 1% increase in the value of the Japanese yen relative to the dollar, the profits of this firm shrink by $5,000.The second is a safe domestic firm which is certain to yield him $70,000 a year.The two firms cost the same.If Bill is risk averse,

• A)he should buy the domestic firm.
• B)he should buy the import firm.
• C)he should buy half of each of these two firms.
• D)it doesn't matter which he buys.
• E)he should buy 80% of the domestic firm and 20% of the import firm.

Apply critical thinking to solve problems related to the organization of comparative and contrastive information.

Understand the concepts of margin of error, confidence interval, and sample size in the context of statistical polling and inference.

Calculate confidence intervals for proportions and means from given data.

Determine the adequacy of sample sizes for specific margins of error and confidence levels.

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Definitions:

Vesting Period

The vesting period is the time during which an employee must wait to earn the right to fully own employer-provided stock options or contributions to a retirement plan.

Remuneration Expense

The total cost incurred by a company to compensate its employees, including wages, salaries, and benefits.

Exercise Price

The specified price at which an option's underlying security can be bought (call option) or sold (put option) by the option holder.

Fair Value

The estimated price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.