For each of the following statements, state whether the statement ...

[Sufayan.ah]

For each of the following statements, state whether the statement is true, false, or uncertain and explain why.
 
  i. A risk neutral person is indifferent to a gamble and the expected value of the gamble.
  ii. A risk-averse person will never accept a gamble.
  iii. A risk-loving person will accept any gamble.

Question 2

The Social Security program is like a private pension plan in that _____.
 
  a. it is a pay-as-you-go system
  b. it is voluntary
  c. benefits are a function of earlier contributions
   d. you have a legal right to your benefits

[ilianabrrr]

Answer to Question 1

i. True, the expected utility of a gamble equals the utility of the expected value for a R.N. individual.
ii. False, a risk averse person will not accept a fair gamble (or worse) but may accept a gamble with a positive expected value.
iii. False, a risk loving individual will accept any fair gamble, but if the expected value is sufficiently negative, they will not accept the gamble.

Answer to Question 2

c

[Sufayan.ah]

Thanks for the timely response, appreciate it

[helenmarkerine]

Wow, this really help