The larger the fraction of an investment financed by borrowing
A) the greater the potential return and the smaller the potential loss on that investment.
B) the smaller the potential return and potential loss on that investment.
C) the greater the potential return and potential loss on that investment.
D) the smaller the potential return and the greater the potential loss on that investment.
C
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Which of the following is the best example of an investment in human capital?
a. on-the-job training received by an apprentice electrician b. an increase in the number of hours worked per week by a worker in an unskilled laboring job c. the purchase of company stock by a worker d. payments into a retirement pension plan by a skilled laborer
John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. If John decides to expand based on expected value, it means that:
A. the difference in expected earnings from expanding versus not must exceed $150,000. B. the sum of expected earnings from expanding and from not must exceed $150,000. C. the difference in expected earnings from expanding versus not must not exceed $150,000. D. his expected earnings from expansion must exceed $150,000.