Which of the Following Statements Is Correct for a Decision

question 66

Multiple Choice

Which of the following statements is correct for a decision maker facing a choice between a sure thing and a lottery when the sure thing has the expected payoff of the lottery?

• A)Risk-loving decision makers will require a positive risk premium to bear risk.
• B)Risk-neutral decision makers will require a positive risk premium to bear risk.
• C)Risk-averse decision makers will require a positive risk premium to bear risk.
• D)The risk premium depends on the characteristics of the lottery, not on the characteristics of the utility function of the decision maker.

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Definitions:

Capital Account

An account showing the net changes in property ownership and transfer of payment among countries for international transactions, or in a company's context, represents the stake of owners in the firm.

Revenue Accounts

Accounts that record the income generated from the sale of goods and services, before any expenses are subtracted.

Income Summary

A temporary account used in the closing process that summarizes a company's revenues and expenses for the accounting period.

Revenue Account(s)

Accounts that track the income generated from the sale of goods or provision of services before any expenses are deducted.