Pedro's Utility of Wealth Is 6 Units for $10,000 and 10

question 64

Multiple Choice

Pedro's utility of wealth is 6 units for $10,000 and 10 units for $20,000. A friend gave him a lottery ticket for his birthday. The ticket won, giving him either $10,000 with probability 0.5 or $20,000 with probability 0.5. Pedro's expected utility from the lottery ticket is

• A) between 6 and 8 units.
• B) equal to 8 units.
• C) between 8 and 10 units.
• D) equal to 10 units.

---

Definitions:

Interest Rate

The cost of borrowing money, expressed as a percentage of the total amount borrowed, paid by the borrower to the lender for the use of their money.

Interest Rate

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal, per period of time.

Years From Now

Projected or anticipated time in the future, often used in planning, forecasting, or speculation about future conditions or situations.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan amount.