Investors Al and Bea Lend $100,000 to Each New Idea

question 41

Multiple Choice

Investors Al and Bea lend $100,000 to each new idea.Al's history is that he selects low-risk projects or ideas that hit 80% of the time.Bea's history is that she takes on high-risk projects that hit 40% of the time.What rate of return must each successful project pay Al and Bea for them to break even?

• A)Al's rate is 150%,and Bea's rate is 25%.
• B)Al's rate is 40%,and Bea's rate is 40%.
• C)Al's rate is 25%,and Bea's rate is 150%.
• D)Al's rate is 30%,and Bea's rate is 150%.

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Definitions:

SUTA Tax

State Unemployment Tax Act tax, a payroll tax that employers pay to fund the state's unemployment insurance.

Medicare

A federal health insurance program in the United States for people aged 65 and older, as well as for some younger people with disabilities.

Federal Income Tax

A tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.