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In our everyday life we often have to make decisions with uncertain consequences. Assume that you are a hotel manager considering four projects that
In our everyday life we often have to make decisions with uncertain consequences. Assume that you are a hotel manager considering four projects that yield different payoffs, depending upon whether there is an economic boom or a recession. The potential payoffs and corresponding payoffs are summarized in the following table. Project A Boom (50%) Recession (50%) $40 -$20 B -$10 $30 C $50 -$50 D $60 $60 Which of the following statements is true? A risk-averse manager will prefer project D. A risk-neutral manager will prefer project D A risk-loving manager will prefer project D. All of the statements are correct
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