Suppose you are risk neutral and you are deciding between two investments. One has a guaranteed return of 2% while the second has a 60% chance of a 10% return and a 40% chance of a -5% return. Which investment would you choose? Why?
What will be an ideal response?
The second investment has an expected return of (0.6 × 10%)+(-5% × .4 ) = 4%. Since this is great than the expected return of the first investment, you choose the second investment.
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Rob is considered unemployed in the Current Population Survey if he
A) does not have a job and stopped looking for a job at least two months ago. B) is in his last term of college before he graduates. C) has looked for a job in the last four weeks but has not found a job. D) has a part-time job but would like a full-time job. E) has worked at least 1 hour but not more than 15 hours as a paid employee during the last week.
For the purpose of measuring the cost of living for consumers, one reason the GDP price index is NOT a good substitute for the CPI is because the GDP price index
A) compares a current year basket of goods with a base year basket of goods. B) compares current year's prices with base year's prices. C) includes the prices of exported goods, which are not consumed in the United States. D) and the CPI move in the same direction over time. E) has a larger bias than does the CPI.
The "benefits" from government programs to reduce mismatch unemployment include reduction in
A) private costs such as lost income and erosion of job skills. B) private costs such as lost leisure and lower alcohol consumption. C) social costs such as lower unemployment compensation and welfare payments. D) A and C.
According to a royal investigation in 1623 of the English colonies in Virginia, the average life expectancy of newly arrived setters was
a. 2 years. b. 5 years. c. 10 years. d. 20 years.