Investors Al and Bea lend $100,000 to each new idea. Al's history is that he selects low-risk projects or ideas that hit 80% of the time. Bea's history is that she takes on high-risk projects that hit 40% of the time
What rate of return must each successful project pay Al and Bea for them to break even?
A) Al's rate is 150%, and Bea's rate is 25%.
B) Al's rate is 40%, and Bea's rate is 40%.
C) Al's rate is 25%, and Bea's rate is 150%.
D) Al's rate is 30%, and Bea's rate is 150%.
Answer: C
Explanation: C) With Al's rate of success, we know that eight out of ten projects are successful and that Al is repaid the loan eight out of ten times. Therefore, we must get enough funding from the eight successful projects to cover all ten projects. So if we make ten loans of $100,000 each, we need to recover $1,000,000 from the eight successful projects. Thus, each successful project must repay = $125,000. Therefore, the loan "return" rate on each successful project must be: = 25%. With Bea's rate of success of 40%, we have four successful projects out of every ten, so = $250,000 needs to be recovered, giving a loan return rate of: = 150% from each of the four successful projects.
You might also like to view...
Quality hospitality organizations build the service production processes based on ______.
a. their own perspective b. the guest’s perspective c. employee convenience d. efficiency
There are 100 white male applicants for the job and 60 were selected. There were 20 African-American male applicants for the job and 10 were selected. Is there evidence for disparate impact against African-Americans based on the Four-Fifths Rule?
A. Yes, because the white male hiring rate was above the black male hiring rate. B. Yes, because the hiring rate of African-American males is more than 80 percent of the white male hiring rate. C. No, because the black male hiring rate was above the white male hiring rate. D. Yes, because there were fewer African-American applicants. E. No, because the hiring rate of African-American males is within 80 percent of white males.
You recently purchased a stock for $25. It is now worth $35, and it paid a $5 dividend during the time you held it. Your rate of return on this stock is closest to which of the following?
A) 60% B) -20% C) 43% D) 40%
A network diagram and a deployment diagram show basically the same information, just in a different format
a. True b. False Indicate whether the statement is true or false