A decision-maker is faced with a choice between a lottery with a 30% chance of a payoff of $30 and a 70% chance of a payoff of $80,and a guaranteed payoff of $65.If the decision maker's utility function is U = ,what is the risk premium associated with this choice?
A) $1.59
B) $2.52
C) $0
D) $3.95

Question

A decision-maker is faced with a choice between a lottery with a 30% chance of a payoff of $30 and a 70% chance of a payoff of $80,and a guaranteed payoff of $65.If the decision maker's utility function is U =  ,what is the risk premium associated with this choice?
A) $1.59 
B) $2.52 
C) $0 
D) $3.95

Quizplus · Accepted Answer

The Answer of A decision-maker is faced with a choice between a lottery with a 30% chance of a payoff of $30 and a 70% chance of a payoff of $80,and a guaranteed payoff of $65.If the decision maker's utility function is U =  ,what is the risk premium associated with this choice?
A) $1.59 
B) $2.52 
C) $0 
D) $3.95

A Decision-Maker Is Faced with a Choice Between a Lottery