returns will have evened out. 6. You are a contestant on Let's Make a Deal, and have just won $1,000. But you can exchange the winnings for two random payoffs. One is a coin flip with a payoff of $2,500 if the coin comes up heads. The other is a flip of two coins with a payoff of $6,000 if both coins come up heads. What will you do? a. Keep the $1,000 in cash. b. Choose the single coin toss. c. Choose the double coin toss. 7. Suppose you have the opportunity to invest in a start-up firm. If the firm is successful, you will multiply your invest- ment by a factor of ten. But if it fails, you will lose everything. You think the odds of success are around 20%. How much would you be willing to invest in the start-up? a. Nothing b. 2 months' salary c. 6 months' salary 8. Now imagine that to buy into the start-up you will need to borrow money. Would you be willing to take out a $10,000 loan to make the investment? a. No b. Maybe c. Yes
returns will have evened out. 6. You are a contestant on Let's Make a Deal, and have just won $1,000. But you can exchange the winnings for two random payoffs. One is a coin flip with a payoff of $2,500 if the coin comes up heads. The other is a flip of two coins with a payoff of $6,000 if both coins come up heads. What will you do? a. Keep the $1,000 in cash. b. Choose the single coin toss. c. Choose the double coin toss. 7. Suppose you have the opportunity to invest in a start-up firm. If the firm is successful, you will multiply your invest- ment by a factor of ten. But if it fails, you will lose everything. You think the odds of success are around 20%. How much would you be willing to invest in the start-up? a. Nothing b. 2 months' salary c. 6 months' salary 8. Now imagine that to buy into the start-up you will need to borrow money. Would you be willing to take out a $10,000 loan to make the investment? a. No b. Maybe c. Yes
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3MC: You have been hired at the investment firm of Bowers & Noon. One of its clients doesn’t understand...
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