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Looking at both of these scenarios, his expected compensation is $12k. Even so, Plan A's certainty equivalent (least possible compensation of 100K) is high compared
Looking at both of these scenarios, his expected compensation is $12k. Even so, Plan A's certainty equivalent (least possible compensation of 100K) is high compared to Plan B's certainty equivalent (least possible compensation of 75K). Since people are risk averse, he would select plan A which has a higher base compensation with a lower beta
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