The Difference Between the Utility of Expected Income and Expected

question 119

Multiple Choice

The difference between the utility of expected income and expected utility from income is:

• A) zero because income generates utility.
• B) positive because if utility from income is uncertain, it is worth less.
• C) negative because if income is uncertain, it is worth less.
• D) that expected utility from income is calculated by summing the utilities of possible incomes, weighted by their probability of occurring, and the utility of expected income is calculated by summing the possible incomes, weighted by their probability of occurring, and finding the utility of that figure.
• E) that the utility of expected income is calculated by summing the utilities of possible incomes, weighted by their probability of occurring, and the expected utility of income is calculated by summing the possible incomes, weighted by their probability of occurring, and finding the utility of that figure.

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Definitions:

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures, including all interest payments and the return of principal.

Treasury Securities

Reiteration of U.S. Treasuries, but emphasizing these are safe, low-risk investment products backed by the full faith and credit of the U.S. government, including Treasury bonds, notes, and bills.

Bond Equivalent Yield

Bond yield calculated on an annual percentage rate method. Differs from effective annual yield.

Quoted Bid Price

The highest price a buyer is willing to pay for a security or commodity at a given moment.