Obi-Wan is considering whether to buy a lightsaber. With probability 0.50 he will value the lightsaber at $4,000, and with probability 0.50 he will value it at $1,000. If Obi-Wan is risk averse, then he will be willing to pay ________ for a new lightsaber.
A. less than $2,500
B. less than $4,000
C. more than $2,500
D. more than $4,000
Answer: A
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Financial instruments with high information costs
A) will usually be more liquid than similar instruments with low information costs. B) will have lower yields than U.S. Treasury securities. C) may not be offered for sale in some states. D) will have lower prices than similar instruments with low information costs.
The Great Depression and the New Deal transformed the U.S. into which type of economy?
(a) Laissez-faire (b) Socialist (c) Mixed (d) Communist
What is the exact real interest rate, when the nominal interest rate is 30% and expected inflation 26%?
a. 3.0% b. 3.2% c. 3.7% d. 4.0% e. 4.2%
Which of the following would most likely discourage investment?
a) an increase in the selling price of a firm’s output b) a reduction in the selling price of corporate stock c) an increase in bond prices d) a reduction in the rate of inflation e) an increase in the optimal capital stock