A manager has a choice of three bank CDs that pay different ...

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A manager has a choice of three bank CDs that pay different amounts of fixed interest over different time periods. The manager is operating under which condition?
 
  A) jeopardy
  B) certainty
  C) uncertainty
  D) risk

Question 2

A manager has a choice of three investment funds. To assess them, he looks at their past investment records over the previous five years. The manager is operating under which condition?
 
  A) certainty
  B) probability
  C) uncertainty
  D) risk

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Answer to Question 1

Answer: B
Explanation: The manager knows the exact amounts of interest that the CDs will pay over each time period, so he is operating under a condition of certainty. Risk would require the manager to need to estimate the interest that the funds would generate. Uncertainty would be a condition in which the manager could not even make good estimates for each fund. Jeopardy is not a recognized decision-making condition.

Answer to Question 2

Answer: D
Explanation: The manager can use the investment records over previous years to assign probabilities to each fund. That means he is operating under a condition of risk. Certainty would require that he would know precisely how funds would perform, while uncertainty would mean he would have no way to predict performance. Probability is not a recognized decision-making condition.