Multiple Choice
(Scenario: Diversification) Use Scenario: Diversification.If Morris invests all of his money in the sunglass company,what is his expected gain or loss? Scenario: Diversification
Morris is considering investing $10,000 in a sunglass company or a rain poncho company.If it is a rainy year and he invests only in the sunglass company,he will lose $5,000.However,if it is a rainy year and he invests only in the rain poncho company,he will earn $10,000.If it is a sunny year and he invests only in the sunglass company,he will earn $10,000;if he invests only in the rain poncho company,he will lose $5,000 in a sunny year.There is a 50% chance of a sunny year and a 50% chance of a rainy year.
A) a loss of $2,500
B) to break even
C) a gain of $2,500
D) a gain of $10,000
Correct Answer:
Verified
Correct Answer:
Verified
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