A Person Who Has a Utility Function (With Income on the Horizontal

question 23

Multiple Choice

A person who has a utility function (with income on the horizontal axis and utility on the vertical axis) that curves up as income increases is:

• A) risk-averse and profit maximizing.
• B) risk-averse and not profit maximizing.
• C) risk loving and profit maximizing.
• D) risk loving and not profit maximizing.
• E) risk-neutral.

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Definitions:

Expected Part

The segment anticipated or forecasted in a scenario or model, usually referring to expected outcomes or returns.

Surprise

An unexpected event or outcome that may significantly impact financial markets or investment portfolios.

Expected Return

The anticipated profit or loss from an investment over a specified period, considering potential risks.

Economic States

Different conditions of an economy, characterized by various indicators like GDP growth, unemployment rate, inflation, and market trends.