Which of the following is not consistent with Prospect Theory decision making, If a suit and tie together cost $200, and the suit costs $180 more than the tie costs, many people would likely say the tie costs $20. Sometimes people will take a risky gamble even if the odds are greater that they will lose more money than they can gain. People always make the same decisions if the outcomes and consequences are always the same. O People sometimes make decisions that are incorrect if judgements take too much effort.
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- Which of the following statements is FALSE? A. You invest today only when the NPV of investing today exceeds the value of the option of waiting, which from option pricing theory we know to be always positive. B. When you do not have the option to wait, it is optimal to invest in any positive−NPV project. C. One way to see why you sometimes choose not to invest in a positive−NPV project is to think about the decision of when to invest as a choice between two mutually exclusive projects: (1) invest today or (2) wait. D. When you have the option of deciding when to invest, it is usually optimal to invest only when the NPV is positive but close to zero.In an experiment on risk aversion, a group of people were given the following choice: A) Lose $100 with certainty, or B) 50% chance to win $50, 50% chance to lose $200. An overwhelming majority chose option B. This can be best explained by which of the following? Option B has a smaller expected loss than option A. Option B has an expected gain as opposed to certain loss with option A. This behavior violates the Weak Axiom of Revealed Preference. People have a greater aversion to loss than to risk. This behavior is consistent with risk aversion with losses.An 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?
- The maln rule In Investing Is: Select one: O a. don't invest unless the percelved risk is high enough to make up for the expected return O b. only invest if the percelved risk is high enough to make up for the expected return O c. buy high sell low O d. don't invest unless you know what the return and risks will be e. don't invest unless the expected return is high enough to make up for the perceived risk Clear my choiceNo risk, no reward. Most people intuitively understand that they have to bear some risk to achieve an acceptable return on their investment portfolios. But how much risk is right for you? If your investments turn sour, you may put at jeopardy your ability to retire, to pay for your kid's college education, or to weather an unexpected need for cash. These worst-case scenarios focus our attention on how to manage our exposure to uncertainty. Assessing and quantifying-risk aversion is, to put it mildly, difficult. It requires confronting at least these two big questions. First, how much investment risk can you afford to take? If you have steady high-paying job, for example, you have greater ability to withstand investment losses. Conversely, if you are close to retirement, you have less ability to adjust your lifestyle in response to bad investment outcomes. Second, you need to think about your personality and decide how much risk you can tolerate. At what point will you be unable to…You've heard the expression "no pain, no gain"? In the investment world, the comparable phrase would be "no risk, no reward." How you feel about risking your money will drive many of your investment decisions. The risk-comfort scale extends from very conservative (you don't want to risk losing a penny regardless of how little your money eans) to very aggressive (you're willing to risk much of your money for the possibility that it will grow tremendously). As you might guess, most investors' tolerance for risk falls somewhere in between. If you're unsure of what your level of risk tolerance is, this quiz should help. 1. You win $300 in an office football pool. You: (a) spend it on groceries, (b) purchase lottery tickets, (c) put it in a money market account, (d) buy some stock. 2. Two weeks after buying 100 shares of a $20 stock, the price jumps to over $30. You decide to: (a) buy more stock; it's obviously a winner, (b) sell it and take your profits, (c) sell half to recoup some costs…
- Which strategy would be best for Kelly to deploy if she thinks the stock market will decline and she wants to protect the downside, while maintaining any upside if she is wrong about the market situation: a Protective puts b Covered calls c Zero-cost collarsWhat happens if you sell short calls and they become deep in-the-money? A. You risk being assigned to buy the stock. B. Your broker may tell you to immediately cover your short calls. C. You risk assignment any time your short calls are deep in-the-money prior to expiration. D. You can just buy an equal number of puts to cover your short calls.According to Peter Bernstein "When we take a risk, we are betting an outcome that will result from a decision we have made, though we do not know for certain what the outcome will be" Explain exactly why
- A Moving to another question will save this response. Question 14 The market compensates investors for accepting which type(s) of risk? O None of the listed selections are correct O market and firm-specific risk O market risk only O firm-specific risk only O diversifiable risk A Moving to another question will save this response. MacBoc esc F1 F2 F3 F4 F5 # $ 2 4 W E T 60A risk-loving person (select all that applies) Group of answer choices a) will never make an investment with a risk-free payoff. b) has a convex utility function of income. c) has a concave utility function of income. d) will always choose the alternative with the largest risk. e) has increasing marginal utility of income.Please answer with true or false 1. Common stocks and preferred stocks come with the same voting right 2. The shorter your time horizon , the less conservative you should be in investing your money. 3.If there is a little amount of risk in your investment, there will also a relatively little potential amount of return. 4.Your personality should be considered in making an investment 5. An investors financial position will also affect his or her objectives .