Look at the Utility Function Graphed Below and Select the Type

question 29

Multiple Choice

Look at the utility function graphed below and select the type of decision maker that corresponds to the graph.

• A) risk player
• B) risk neutral
• C) risk taker
• D) risk averter

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Definitions:

Subjective Approach

A method of decision-making or valuation based on personal judgments and opinions rather than objective data.

Risk Classes

Categories of investments grouped together based on their similar level of risk.

Discount Rates

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often used in capital budgeting to evaluate potential projects.