The parameter R in the exponential utility function U(x) = 1 - e-x/R represents the decision maker's risk tolerance. Larger values of R indicate that the decision maker

A. is less risk averse (closer to neutral).
B. is more risk averse (has less risk tolerance).
C. is not concerned with risk.
D. will accept the gamble.


Answer: A

Business

You might also like to view...

During the ________ stage of a product's life cycle, sales show a downward drift and profits erode

A) introduction B) growth C) decline D) obsolescence E) maturity

Business

For an offer to be valid:

a. the offeree must have knowledge of the offer. b. the offeree must have first-hand knowledge of the offer. c. the offer must be stated or communicated by words. d. the offer must be made by the offeror.

Business

A contract for a work of art is a personal contract

Indicate whether the statement is true or false

Business

If the world capital market were fully integrated, the incentive to swap would be ________ because ________ arbitrage opportunities would exist

A) increased; more B) reduced; fewer C) increased; fewer D) reduced; more

Business