Exhibit 14.7
The following questions use the information below.
A decision maker is faced with two alternatives.The decision maker has determined that she is indifferent between the two alternatives when p = 0.45.
Alternative 1: Receive $82,000 with certainty
Alternative 2: Receive $143,000 with probability p and lose $15,000 with probability 1 − p).
-Refer to Exhibit 14.7.What is the decision maker's certainty equivalent for this problem?
A)−$15,000
B)$82,000
C)$56,100
D)$82,000.

Question

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The Answer of Exhibit 14.7
The following questions use the information below.
A decision maker is faced with two alternatives.The decision maker has determined that she is indifferent between the two alternatives when p = 0.45.
Alternative 1: Receive $82,000 with certainty
Alternative 2: Receive $143,000 with probability p and lose $15,000 with probability 1 − p).
-Refer to Exhibit 14.7.What is the decision maker's certainty equivalent for this problem?
A)−$15,000
B)$82,000
C)$56,100
D)$82,000.

Exhibit 14.7 The Following Questions Use the Information Below