Which type of situation best represents "gambling for redemption"?
A)A manager decides to invest in a single new product instead of three different products.
B)A firm risks its reputation on the introduction of a revolutionary product.
C)The firm's treasurer invests all of its cash in a single money market mutual fund.
D)A firm on the verge of bankruptcy invests all available funds in a high-risk, low-NPV project in order to attempt to save itself.

Question

Quizplus · Accepted Answer

Gambling for redemption involves taking a high-risk decision in order to save oneself from a dire situation. In option D, the firm on the verge of bankruptcy invests all available funds in a high-risk project with a low NPV in an attempt to save itself, which represents gambling for redemption. Options A, B, and C do not involve a similar high-risk decision to save oneself from a dire situation.

Which Type of Situation Best Represents "Gambling for Redemption