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 ,what is the risk premium associated with this choice?
A) $0
B) $1
C) $2
D) $3

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  ,what is the risk premium associated with this choice?
A) $0 
B) $1 
C) $2 
D) $3

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  ,what is the risk premium associated with this choice?
A) $0 
B) $1 
C) $2 
D) $3

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