-Lucy works as a college instructor for a fixed annual salary of $30,000. She is considering quitting this job and becoming a real estate broker. Lucy believes that as a realtor she has a 40 percent chance to make $60,000 per year and a 60 percent chance to make $25,000 a year. The figure above shows Lucy's total utility of wealth curve (U) . Lucy will decide to ________ and she will definitely make this choice because it gives her a greater expected ________.
Definitions:
Business Risk
The potential for loss or failure in the operation of a company, often due to external and internal factors.
Financial Assets
Assets that derive value because of a contractual claim on them, such as stocks, bonds, bank deposits, and other investments.
Non-Financial Assets
Assets that are not in the form of cash or cannot be easily converted to cash, such as property, plant, and equipment.
Risk-Free Assets
Investments that are considered to carry no risk of financial loss, typically represented by government bonds or treasury bills.
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