Julia Is Thinking About Leaving Her Place of Work and Starting

question 6

Multiple Choice

Julia is thinking about leaving her place of work and starting her own business. If she stays with her company, there is an 85 percent chance that she will remain in her current role earning $40,000 per year and a 15 percent chance that she will receive a promotion and earn $50,000 per year. If she starts her own business, there is a 30 percent chance she'll earn $60,000 per year; a 20 percent chance she'll earn $80,000 per year; and a 50 percent chance she'll earn $20,000 per year. Which of the following statements is true?If Julia is risk averse, she will definitely prefer to stay with her current company.If Julia is risk neutral, she will definitely prefer to start her own business.The expected value of Julia's earnings is $44,000 if she starts her own business.

• A)I and III only
• B)II and III only
• C)I and II only
• D)I, II, and III

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