Marta has an idea for a new product that could earn $1 million if successful. It would cost $600,000 to bring it to market, and that is the potential loss if it fails. Marta estimates that it has a 60% chance of success and 40% chance of failure. Marta is not willing to accept the risk of failure. She enlists 1,000 investors to each put in $600 toward the cost with a promise that they will share proportionately in the profits. What risk reduction strategy is Marta using?

Question

Quizplus · Accepted Answer

Marta is using a risk spreading strategy by enlisting 1,000 investors to each put in $600 toward the cost with a promise that they will share proportionately in the profits. This spreads the risk among multiple investors, reducing Marta's potential loss if the product fails.

Marta Has an Idea for a New Product That Could