Suppose Player X's probability of winning a gamble is 0.8 while that of Player Y is 0.5 . Which of the two will be willing to pay for a test and why?
The player who has a lower probability of success will be more likely to opt for a tester to assure himself of a higher return. The test would help to reduce his uncertainty about the outcomes.
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When a foreign investor buys a bond issued in the United States
A) the balance on the capital account increases. B) the balance on the current account increases. C) the balance of trade increases. D) the balance on the financial account increases.
In the figure above, the decrease in the interest rate from i1 to i2 can be explained by
A) a decrease in money growth. B) a decline in the expected price level. C) an increase in income. D) an increase in the expected price level.
A firm has two plants, one located in desirable Scenic Springs and the other located in the undesirable Swamp Lands. If the workers in Scenic Springs are paid $50,000 a year and the workers in Swamp Land are paid $60,000, which of the following is true?
A) The $10,000 difference in salaries is the worker equity payment. B) The $10,000 difference in salaries is the compensating wage differential. C) The $60,000 salary is a worker equity payment. D) The $60,000 salary is a compensating wage differential.
If the market price of an option just before its expiration is $33 while its strike price is $29, arbitrage will determine a price for it that:
a. leaves an investor indifferent between buying the stock outright or buying an option and then exercising it. b. encourages the investor to buy the stock outright and sell it when the option expires. c. encourages the investor to buy an option and exercise it only after its expiration. d. encourages the investor to buy the stock outright and rewrite an option later.