Which of the following statements is correct? well-diversified stockholders do not need to consider market risk when determining required rates of return. one advantage of sensitivity analysis relative to scenario analysis is that it explicitly takes into account the probability of specific effects occurring, whereas scenario analysis cannot account for probabilities. sensitivity analysis is a good way to measure market risk because it explicity takes into account diversification effects. simulation analysis is a computerized version of scenario analysis where input variables are selected randomly on the basis of their probability distributions.

Susie buys two goods - rounds of golf and massages. suppose that the price of a round of golf is $20, and the price of a massage is $30. in a typical week susie will play two rounds of golf, getting 20 units of satisfaction from the second round. she normally buys three massages each week, with the third giving her 30 units of satisfaction. if she were to buy a fourth massage in a week, it would give her 20 units of satisfaction. if the price of massages is reduced to $15, which of the following outcomes might we expect to occur? a) susie would leave her consumption choices unchanged because of diminishing marginal utility in the consumption of massages. b) susie would buy more massages and more rounds of golf, as predicted by the substituion effect. c) susie would buy more massages and fewer rounds of golf, as predicted by the substitution effect. d) susie would buy more massage and fewer rounds of golf, as predicted by income effect.