Figure 9-2

question 335

Multiple Choice

Figure 9-2. The figure shows a utility function for Mary Ann.

-Refer to Figure 9-2. From the appearance of the utility function, we know that

• A) Mary Ann is risk averse.
• B) Mary Ann gains less satisfaction when her wealth increases by X dollars than she loses in satisfaction when her wealth decreases by X dollars.
• C) the property of diminishing marginal utility applies to Mary Ann.
• D) All of the above are correct.

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Definitions:

Compounded Monthly

A method of calculating interest where the interest earned each month is added to the principal, thus earning interest in subsequent months.

RRSP

Registered Retirement Savings Plan, a Canadian account for holding savings and investment assets with tax benefits for retirement.

Deposits

Funds placed into an account at a financial institution for safekeeping or to earn interest.

Compounded Monthly

An interest calculation method where interest is added to the principal balance on a monthly basis, resulting in interest being earned on top of interest.