A Person Who Is Risk Averse Might Accept a 50

question 91

Multiple Choice

A person who is risk averse might accept a 50% chance of losing $100 today in exchange for a 50% chance of winning $125 in two years if the interest rate was

• A)9% but not 10%
• B)10% but not 11%
• C)11% but not 12%
• D)None of the above is correct;a risk averse person would not accept any of the above bets.

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Definitions:

Absolute Threshold

The minimum intensity of a stimulus that one can detect 50% of the time.

Psychophysical Threshold

The minimum level of stimulus intensity needed for detection by sensory systems.

Subliminal Stimuli

Stimuli that are below the threshold of conscious perception, often used in reference to messages that are not consciously detected but can impact behavior.

Selective Perceptions

The cognitive process by which individuals focus attention on particular elements of their environment while ignoring others.