Which of the Following Statements Is Correct for a Decision

question 24

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 had the expected payoff of the lottery are equal?

• 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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