Suppose Interest of 5% for Two Years Can Be Earned

question 96

Multiple Choice

Suppose interest of 5% for two years can be earned on $1,000 saved today with no risk.What is the least amount a person would need to have a 50% chance of winning to be willing to face a 50% chance of losing $1,000 today and be considered risk averse?

• A)$907.03 to be paid in two years
• B)$1,000.01 to be paid in two years
• C)$1,100.01 to be paid in two years
• D)$1,102.51 to be paid in two years

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Definitions:

Neo-Liberalism

An economic and political ideology and policy model that emphasizes the value of free-market competition, minimizing state intervention in the economy.

Sweeping Generalization

A broad and oversimplified conclusion or statement that does not account for exceptions or differences.

Stable

Describes a state of equilibrium or consistency within a system, characterized by the absence of significant change or fluctuation.

Socially Excluded

Individuals or groups who are marginalized from participating fully in economic, social, and cultural life of their community or society.