Lotteries a and B Have the Same Expected Value, but B

question 71

Multiple Choice

Lotteries A and B have the same expected value, but B has larger variance. Which of the following statements is true, all else equal?

• A)If the decision maker is risk averse, lottery A will have the larger risk premium.
• B)If the decision maker is risk neutral, lottery B will have the larger risk premium.
• C)If the decision maker is risk loving, both lotteries will have a positive risk premium.
• D)If the decision maker is risk averse, lottery B will have the larger risk premium.

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Definitions:

Ethical Choice

A decision-making process that involves evaluating and selecting among alternatives based on moral principles and values.

Generational Influences

The impact that the values, behaviors, and communication styles of one generation have on society or workplaces.

Values

Core beliefs or standards that guide behavior and decision-making, reflecting what is important to an individual or group.

Cultural Differences

The diverse customs, beliefs, practices, and social behaviors that distinguish various human societies and groups.