-Wendy Works as a Teller at a Bank for a Fixed

question 217

Essay

-Wendy works as a teller at a bank for a fixed salary of $1,800 per month. She is offered a job as a salesperson at which there is a 40 percent chance that she will make $5,000 a month and a 60 percent chance that she will make only $1,000 a month. The figure shows Wendy's utility of wealth curve:
a) What is Wendy's expected income from the offered job?
b) What is Wendy's expected utility from the offered job?
c) Will Wendy accept the offer? Why or why not?
d) What is the minimum fixed salary for which Wendy will continue to work for the bank and not take the sales job?

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Definitions:

Recessionary Period

denotes a time of economic decline when the economy reduces its activities significantly, typically marked by decreases in spending and increases in unemployment.

Economic Boom

A period of significantly increased economic activity characterized by high growth rates in GDP and employment.

Portfolio Weights

The percentages of each asset in a portfolio, indicating the relative size of each investment within the portfolio.

Market Value

The price at this moment for buying or selling an asset or service in the market.