The Assumptions Concerning the Shape of Utility Functions of Investors

question 1

Multiple Choice

The assumptions concerning the shape of utility functions of investors differ between conventional theory and prospect theory.Conventional theory assumes that utility functions are __________, whereas prospect theory assumes that utility functions are __________.

• A)concave and defined in terms of wealth; s-shaped (convex to losses and concave to gains) and defined in terms of losses relative to current wealth
• B)convex and defined in terms of losses relative to current wealth; s-shaped (convex to losses and concave to gains) and defined in terms of losses relative to current wealth
• C)s-shaped (convex to losses and concave to gains) and defined in terms of losses relative to current wealth; concave and defined in terms of wealth
• D)s-shaped (convex to losses and concave to gains) and defined in terms of wealth; concave and defined in terms of losses relative to current wealth

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Definitions:

Internet-Based Inventory

Inventory management systems that use internet technologies to monitor and manage the stock levels of products.

Net Profit Margin

A financial metric showing the percentage of revenue remaining after all operating expenses, taxes, and interest have been deducted.

Logistics Management

involves overseeing the efficient and effective transportation and storage of goods from origin to consumption.

Shipping Security

Measures and protocols implemented to protect cargo from theft, loss, or damage during transportation.