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Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Which of the following is true? Select one: O a. Investing in Pretty Kitty Grooming offers a higher expected payoff. O b. Even though the expected payoff is the same for both investments, investing in Dog Gone Salon involves less risk. O . Even though the expected payoff is the same for both investments, investing in Pretty Kitty Grooming involves less risk. O d. It doesn't matter how distributes his $500 between the two investments, the expected payoff and the standard deviation will always be the same.

Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Which of the following is true? Select one: O a. Investing in Pretty Kitty Grooming offers a higher expected payoff. O b. Even though the expected payoff is the same for both investments, investing in Dog Gone Salon involves less risk. O . Even though the expected payoff is the same for both investments, investing in Pretty Kitty Grooming involves less risk. O d. It doesn't matter how distributes his $500 between the two investments, the expected payoff and the standard deviation will always be the same.

Essentials of Business Analytics (MindTap Course List)
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
Problem 19P: A firm has three investment alternatives. Payoffs are in thousands of dollars. a. Using the expected...
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Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Which of the following is true? Select one: O a. Investing in Pretty Kitty Grooming offers a higher expected payoff. O b. Even though the expected payoff is the same for both investments, investing in Dog Gone Salon involves less risk. O . Even though the expected payoff is the same for both investments, investing in Pretty Kitty Grooming involves less risk. O d. It doesn't matter how distributes his $500 between the two investments, the expected payoff and the standard deviation will always be the same.
Transcribed Image Text:Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Which of the following is true? Select one: O a. Investing in Pretty Kitty Grooming offers a higher expected payoff. O b. Even though the expected payoff is the same for both investments, investing in Dog Gone Salon involves less risk. O . Even though the expected payoff is the same for both investments, investing in Pretty Kitty Grooming involves less risk. O d. It doesn't matter how distributes his $500 between the two investments, the expected payoff and the standard deviation will always be the same.
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