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In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer: Start small companies all 5 times. B Start large companies all 5 times. Start small companies 3 times and large companies 2 times. Not start any companies.

In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer: Start small companies all 5 times. B Start large companies all 5 times. Start small companies 3 times and large companies 2 times. Not start any companies.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Samuel is an entrepreneur and is trying to decide if he should attempt to start small companies or large companies. Small companies: He has the resources to attempt to start 4 small companies that will each have a 90% chance of becoming successful. If all 4 small companies are successful, he will receive 10 million dollars in profits; otherwise he will lose 3 million dollars in costs. Large companies: He has the resources to attempt to start 2 large companies that will each have a 20% chance of becoming successful. If both large companies are successful, he will receive 20 million dollars in profits; otherwise he will lose 2 million dollars in costs. What is the expected return from starting small companies? Round your answer to the nearest million dollars. million dollars What is the expected return from starting large companies? Round your answer to the nearest million dollars. million dollars In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer:
Transcribed Image Text:Samuel is an entrepreneur and is trying to decide if he should attempt to start small companies or large companies. Small companies: He has the resources to attempt to start 4 small companies that will each have a 90% chance of becoming successful. If all 4 small companies are successful, he will receive 10 million dollars in profits; otherwise he will lose 3 million dollars in costs. Large companies: He has the resources to attempt to start 2 large companies that will each have a 20% chance of becoming successful. If both large companies are successful, he will receive 20 million dollars in profits; otherwise he will lose 2 million dollars in costs. What is the expected return from starting small companies? Round your answer to the nearest million dollars. million dollars What is the expected return from starting large companies? Round your answer to the nearest million dollars. million dollars In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer:
In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer: A Start small companies all 5 times. Start large companies all 5 times. C Start small companies 3 times and large companies 2 times. D Not start any companies.
Transcribed Image Text:In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer: A Start small companies all 5 times. Start large companies all 5 times. C Start small companies 3 times and large companies 2 times. D Not start any companies.
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