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:

Reverse Transcriptase

An enzyme that transcribes RNA into DNA, used by retroviruses to integrate their genetic material into the host's DNA.

Retroviruses

A group of RNA viruses that insert a DNA copy of their genome into the host cell in order to replicate, including HIV.

RNA Viruses

Viruses that have RNA (ribonucleic acid) as their genetic material, capable of causing various diseases by infecting living cells.

Plasma Membrane

The semipermeable membrane surrounding the cytoplasm of a cell, involved in regulating the entry and exit of substances.