You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market rises in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $200.
ii. The Opportunity Loss for Company B is $200.
iii. The Opportunity Loss for Company C is $200.
A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table.  If the market rises in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $200.
ii. The Opportunity Loss for Company B is $200.
iii. The Opportunity Loss for Company C is $200.
A) (i), (ii), and (iii) are all correct statements. 
B) (i) is a correct statement but not (ii) or (iii). 
C) (ii) is a correct statement but not (i) or (iii). 
D) (i) and (ii) are correct statements but not (iii). 
E) (i), (ii), and (iii) are all false statements.

Quizplus · Accepted Answer

If the market rises in the next year, the payoff for investing in Company A is $300, for Company B is $500, and for Company C is $400. Therefore, the opportunity loss for each company can be calculated by subtracting its own payoff from the maximum payoff among all three companies.

For Company A, the maximum payoff is $500 (the payoff for Company B), so the opportunity loss is $500 - $300 = $200.

For Company B, the maximum payoff is $500 (its own payoff), so the opportunity loss is $500 - $500 = $0.

For Company C, the maximum payoff is $500 (the payoff for Company B), so the opportunity loss is $500 - $400 = $100.

Therefore, statement (ii) is correct (the opportunity loss for Company B is $0), while statements (i) and (iii) are incorrect. The correct answer is C.

You Are Trying to Decide in Which of the Three