Huxley lost $400 in the stock market. According to behavioral economics research, how much of a gain would he have to experience to offset the feeling of loss and have no net change in utili
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Huxley lost $400 in the stock market. According to behavioral economics research, how much of a gain would he have to experience to offset the feeling of loss and have no net change in utility?.
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- In general, what is true of people's risk aversion for changes in income that are marginal (i.e., very small changes in income)? (a) They are less risk averse. (b) Their risk aversion does not change. (c) It depends on the shape of the individual utility function. (d) They are more risk averse.Ceteris paribus, current financial market returns will increase as _____. Group of answer choices a. the uncertainty about the productivity of capital goods increases and people become more risk averse b. the uncertainty about the productivity of capital goods increases and people become less risk averse c. the uncertainty about the productivity of capital goods decreases and people become more risk averse d. the uncertainty about the productivity of capital goods decreases and people become less risk averseErin and Mia are finance researchers and are discussing the Modigliani and Miller (MM) dividend irrelevance theory. Based on your understanding of MM’s argument and the impact of the assumptions applied to the argument, fill in the missing parts of their conversation. ERIN: Modigliani and Miller (MM) dividend irrelevance theory is based on several assumptions. However, in the real world, these assumptions don’t apply. MIA: True. Issuance or flotation costs impact dividend policy decisions, and companies do care about whether to retain earnings or distribute dividends. ERIN: You are right, Mia. Due to the issuance costs with new equity sales, companies tend to make earnings retention or dividend payout more desirable. MIA: If a company pays out dividends and needs funds to invest in profitable projects, it would need to generate capital through new stock issues, which is less or more expensive than using internal cash flow.
- If an individual saved no money for the year from income sources, could their net worth increase? O a. No, because all net worth increases stem from income savings. O b. Yes, net worth would increase by redeeming an investment to pay off debt such as a creat line. Oc. No, because increases in asset values are not reflected in net worth. Od. Yes, net worth would increase if the person made regular mortgage payments and the value of the decrease. Save AnswerErin and Mia are finance researchers and are discussing the Modigliani and Miller (MM) dividend irrelevance theory. Based on your understanding of MM’s argument and the impact of the assumptions applied to the argument, fill in the missing parts of their conversation.ERIN: Modigliani and Miller (MM) dividend irrelevance theory is based on several assumptions. However, in the real world, these assumptions don’t apply.MIA: True. Issuance or flotation costs impact dividend policy decisions, and companies do care about whether to retain earnings or distribute dividends.ERIN: You are right, Mia. Due to the issuance costs with new equity sales, companies tend to make more desirable.Discuss why General Motors’ stockholders probably didn’t suffer as a result of the reported loss. What do you think was the basis for our conclusion?
- Read, think, and share your interpretation of this saying related to the mathematics of finance specifically to simple interest. " If you are born poor it's not your mistake, but if you die poor it's your mistake."The company. New Wifi, was in an unusual situation of being worth more dead than alive. What economic principle was violated when the owner Cabie Garfield tried to get control of the fim, break it up sell the assets and make a profit? Select one Oa Externalties Ob. Diminishing marginal retum O The law of one price Od Non-positive marginal utility of wealth O e. Diminishing marginal utility of wealthWhat is the worst that can happen if you invest your money?
- Which explanation BEST describes John Maynard Keynes' "The Paradox of Thrift?" a. Individuals should reduce spending to cut debt. b. When an individual reduces her or his own spending, he or she reduces someone else's revenue. C. Individuals should borrow money during uncertain economic times. d. Individuals should only borrow money when times are good.Your friend took a finance class and learned about risk/return tradeoff. Wanting a high return, he invested in a risky, start- up Technology Company. A year later, the company went bankrupt and he lost his entire investment. He became furious with his finance lecturer for misleading him, claiming he wastaught that higher return goes with higher risk. Explain how your friend misinterpreted the risk/return tradeoff concept?Both the stock market and and unemployment insurance provide volatile payments that depend on factors like the state of the economy or whether you lose your job. But there is the fundamental difference between the returns you receive from the stock market and the ones you receive from the unemployment insurance. Which is the difference? [Hint: think of the timing when you receive the big payment]
