Author Question: A person who wishes to avoid risk would pick which of the following choices? (Read 55 times)

Collmarie · **on:** Apr 19, 2019

Question 1

Which of the following chances has the biggest expected return?

◦ a 100% chance of getting $5,000
◦ a 40% chance of winning $10,000 and a 60% chance of winning $0
◦ a 50% chance of winning $10,000, 30% chance of winning $20,000 and a 20% chance of losing $20,000
◦ All of these have the same expected return.

Question 2

A person who wishes to avoid risk would pick which of the following choices?

◦ a 100% of getting $4,000
◦ a 50% chance of winning $8,000 or a 50% chance of winning $0
◦ a 50% chance of getting $8,000, 25% chance of getting $16,000 and a 25% chance of losing $16,000
◦ All of these are equal to a person who wishes to avoid risk.

Natalie4ever · **Reply #1 on:** Apr 19, 2019

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