Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog...

 

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Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Which of the following is true? Select one: O a. Investing in Pretty Kitty Grooming offers a higher expected payoff. O b. Even though the expected payoff is the same for both investments, investing in Dog Gone Salon involves less risk. O c. Even though the expected payoff is the same for both investments, investing in Pretty Kitty Grooming involves less risk. O d. It doesn't matter how distributes his $500 between the two investments, the expected payoff and the standard deviation will always be the same. Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Which of the following is true? Select one: O a. Investing in Pretty Kitty Grooming offers a higher expected payoff. O b. Even though the expected payoff is the same for both investments, investing in Dog Gone Salon involves less risk. O c. Even though the expected payoff is the same for both investments, investing in Pretty Kitty Grooming involves less risk. O d. It doesn't matter how distributes his $500 between the two investments, the expected payoff and the standard deviation will always be the same.

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Step 1 Financial risk is defined as the risk which have the different forms of risk that are associa... View the full answer