The certainty equivalent factor can take any value:
A)between -1 and 1.
B)between 0 and 1.
C)between 0 and 100.
D)between -100 and 0.

Question

Quizplus · Accepted Answer

The certainty equivalent factor represents the degree of risk aversion, ranging from 0 (risk-neutral) to 1 (risk-averse). It cannot be negative, which rules out options A and D, and it is expressed as a percentage, so option C is also incorrect. Therefore, the correct answer is B, between 0 and 1.

The Certainty Equivalent Factor Can Take Any Value