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- If the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR, which of the following statements about the other measures of worth for this alternative must be true? i. PW = 0 ii. AW = 0. Solve, a. I onlyb. II only c. Neither I nor II d. Both I and II.Refer to the following payoff table (values are profit): State of Nature Alternative S1 S2 A1 75 −40 A2 0 100 Prior Probability 0.6 0.4 What is the expected payoff of the decision strategy (i.e. using the EMV/EP criterion)?Write definition of following with supporting example being an investor: i) Anchoring effect ii) Attribute substitution iii) Sunk-cost effect iv) Dunning Kru´ ger effect v) Commission bias
- The empirical SML is too flat relative to what CAPM predicts. Researchers have focused on which two possible explanations?. I - Leverage aversion II - Lottery preference III - Myopic loss aversion IV - Risk aversion A. I and II B. I and III C. I and IV D. II and III E. II and IVRisk and Return are Select one: O a. Opposite relationship O b. Go together O c. None of the options d. Conflicting e. Conflicting and go togetherAn investor is consider four different opportunities, A, B, C, or D. The payoff for each opportunity will depend on the economic conditions, represented in the payoff table below. Economic Condition Investment Poor Average Good Excellent (S1) (S2) (S3) (S4) A 50 75 20 30 B 80 15 40 50 C -100 300 -50 10 D 25 25 25 25 What decision would be made under minimax regret?
- Which of the following methods does not consider the investment’s profitability? a. ARR b. Payback c. NPV d. IRRConsider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3. Using the Laplace criterion, what would be the highest expected payoff? S1 S2 S3 A $100 145 120 B $75 125 110 C $95 85 60If the real cost of hedging is ______, then the hedging strategy was beneficial. Group of answer choices negative positive zero
- MN.1 Which of the following is a potential cost or benefit of positive leverage? A interest tax shield B mitigation of information asymmetry C higher goal congruence D direct and indirect costs of financial distress E. All of the aboveThe following profit payoff table was presented in Problem 1: The probabilities for the states of nature are P(s1) = 0.65, P(s2) = 0.15, and P(s3) = 0.20. What is the optimal decision strategy if perfect information were available? What is the expected value for the decision strategy developed in part (a)? Using the expected value approach, what is the recommended decision without perfect information? What is its expected value? What is the expected value of perfect information?In conducting an incremental B/C analysis of this data:a. the DN alternative is not an optionb. the DN alternative is an optionc. there is not enough information given to know if DN is an option or notd. DN is an option only if the alternatives are mutually exclusive