Refer to the Data Provided in Table 17 -Refer to Table 17

question 131

Multiple Choice

Refer to the data provided in Table 17.5 below to answer the following question(s) . The table shows the relationship between income and utility for Lucy.
Table 17.5
$$\begin{array} { | c | c | } \hline \text { Income } & \text { Total Utility } \\\hline \$ 0 & 0 \\\hline \$ 10,000 & 10 \\\hline \$ 20,000 & 20 \\\hline \$ 30,000 & 30 \\\hline \$ 40,000 & 40 \\\hline\end{array}$$
-Refer to Table 17.5. Lucy earns $20,000 annually. She has the opportunity to bet her entire salary on the upcoming super bowl. If Lucy takes the bet, she will pick the Packers. She believes that the Packers have a 50-50 chance of winning the game. If the Packers win, Lucy will double her money ($40,000) but if they lose she loses her entire salary ($0) . This bet can be characterized as

• A) risk-neutral.
• B) an unfair bet.
• C) a fair bet.
• D) risk-loving.

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Definitions:

T-bond Futures

Futures contracts that obligate the buyer to purchase Treasury bonds at a specified price at a future date.

Initial Margin

The minimum amount of funds required to be deposited in a margin account before trading on leverage to ensure that the account can cover potential losses.

Maintenance Margin

The minimum amount of equity that must be maintained in a margin account to cover potential losses.

T-bill Rate

The yield or interest rate on Treasury bills, which are short-term debt securities issued by the U.S. government.