What Decision Criterion Would Be Used by an Optimistic Decision

question 46

Multiple Choice

What decision criterion would be used by an optimistic decision maker solving a problem under conditions of uncertainty?

• A)expected monetary value
• B)equally likely
• C)maximax
• D)maximin
• E)minimin

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Definitions:

Call Option Contracts

Financial agreements giving the buyer the right but not the obligation to purchase an asset at a specified price within a certain period.

Underlying Stock

The specific stock that represents the equity interest in which options, futures, or other derivatives contracts are based on.

Risk-Free Asset

An investment with a guaranteed return and no risk of default, often represented by government bonds from stable governments.

Strike Price

The predetermined price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.