Use the Following to Answer Question

question 34

Multiple Choice

Use the following to answer question:
Table 14.10
Business Fire
Income
Probability
Yes
$160,000
0.10
No
490,000
0.90
-(Table 14.10) Suppose the person's utility function is given by U = I^0.5, where I is income. What guaranteed income level would offer the same expected utility level as that from the uncertain income (i.e., find the certainty equivalent) ?

• A) $432,600
• B) $464,400
• C) $448,900
• D) $457,000

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Definitions:

Histogram

A graphical representation of the distribution of numerical data, often showing the frequency of data intervals.

Interval Data

A type of numerical data where the order and the exact differences between the values matter, but there is no true zero point.

Classes

Groupings or categories into which data or objects are organized based on common characteristics or attributes.

Histogram

A graphical representation of data using bars of different heights to show the distribution of values in a dataset.