Suppose you are risk averse and you are deciding between two investments. One has a guaranteed return of 5% while the second has a 50% chance of a 10% return and a 50% chance of a 0% return. Which investment would you choose? Why?
What will be an ideal response?
The second investment has an expected return of (0.5 × 10%) + (0.5 × 0%) = 5%. Since the two investments have the same expected return and you are risk averse, you choose the first investment.
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In what way did the Dodd-Frank Act reduce bank revenue?
A) It increased the amount banks had to pay on interest to depositors. B) It reduced fees banks could charge when customers took out loans. C) It reduced the amount of interest banks could charge on mortgages. D) It capped the fees that banks could charge stores for debit card transactions.
The phrase "to spread the overhead" refers to reducing the costs that are not directly attributable to the production process
a. True b. False Indicate whether the statement is true or false