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Zepler [3.9K]
3 years ago
7

Which measure of downside risk predicts the worst loss that will be suffered with a given probability

Business
1 answer:
Neporo4naja [7]3 years ago
4 0

Answer: C. value at risk

Explanation:

Value at Risk allows for risk to be measured and by extension controlled as it works by measuring the worst loss that can be suffered by a project, company or portfolio over a given period and given a certain probability.

It is the favorite of financial institutions like commercial banks as they are able to find out just how much losses they face when investing or loaning money out.

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a. $(8000)

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Particulars               Make Bottles            Buy Bottles  Differential

                                Alternative 1             Alternative 2

Purchase Price                  0                       $37                               $(37)

Freight Charges                 0                       $4                                $(4)

Variable cost                    $33                                                          $33

Fixed Cost                        $17                     $17                                  0

Cost per unit                    $50                    $58                              $(8)

Income / (Loss)                 $50,000            $58,000                      $(8,000)

b. The company should choose alternative 1 and make bottles. The buying of bottles will cost company loss of $8,000.

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