Risk Aversion Describes a Person's Tendency To

question 48

Multiple Choice

Risk aversion describes a person's tendency to:

• A) avoid risk at all cost.
• B) be conservative in assessing a certainty equivalent.
• C) select the safest option.
• D) attach lower marginal utility to higher monetary outcomes.
• E) always pay for 100% insurance against risks.

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Definitions:

Draw System

A compensation method where payments made to an employee in advance are later subtracted from their commissions to ensure they receive a consistent income.

Sales Stipend

A fixed sum of money paid to sales employees in addition to commissions to cover expenses or as part of their total compensation.

Security Income

Usually refers to income derived from investments, such as dividends or interest, but can also refer to guaranteed income sources like pensions or social security benefits.

Straight Commission Plan

A compensation structure where an employee's earnings are derived entirely from commissions made from the sales they generate.