Figure: Risk Aversion (Figure: Risk Aversion) Bob and Nancy Have the Same Income

question 185

Multiple Choice

Figure: Risk Aversion
(Figure: Risk Aversion) Bob and Nancy have the same income and total utility.The figure Risk Aversion shows their individual utility functions.Based on the information presented in the figure, which of the following is true?

• A)Nancy will be willing to pay a higher insurance premium because she is more risk-averse than Bob.
• B)Nancy will be willing to pay a lower insurance premium because she is more risk-averse than Bob.
• C)Bob will be willing to pay a higher insurance premium because he is more risk-averse than Nancy.
• D)Nancy will be willing to pay a lower insurance premium because Bob is more risk-averse than she is.

---

Definitions:

Net Income

The company's final financial gain once every expense, tax, and cost is subtracted from the gross income.

Operating Activities

Financial transactions and events related to the core business operations of a company.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Statement of Cash Flows

A financial document that provides detailed information about the cash inflows and outflows for a business over a specific period of time.