(Scenario: Diversification)Use Scenario: Diversification.If Morris invests half of his money in the sunglass company and half in the rain poncho company,he will earn _____ in a sunny year and _____ in a rainy year. 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)$2,500;$0
B)$1,250;$1,250
C)-$2,500;$2,500
D)$2,500;$2,500

Question

Quizplus · Accepted Answer

In a sunny year, investing half in the sunglass company would yield $5,000 (half of $10,000), and investing half in the rain poncho company would result in a loss of $2,500 (half of $5,000), totaling a $2,500 gain. In a rainy year, the situation reverses but the math is the same, leading to a $2,500 gain.