A Certainty Equivalent Income

question 74

Multiple Choice

A certainty equivalent income:

• A)means that there is some amount of income that one will accept with certainty rather than face a gamble.
• B)is an application of the continuity of preferences assumption.
• C)is calculated using the marginal utility of wealth.
• D)means that at high enough income levels there is always an amount of risk that makes one reject a gamble.

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Definitions:

Interest Accrued

Interest that has been earned but not yet paid.

Without Recourse

A term indicating that the holder of a financial instrument cannot demand payment from the original issuer or underwriter in the event of non-payment by the borrower.

Qualifying Words

Words in a legal document that specify conditions or modify the meaning of other words to which they apply.

Accommodation Party

An Accommodation Party is an individual or entity that signs a negotiable instrument on behalf of another, guaranteeing payment without receiving a direct benefit.