Question
Sal and Rick have the following preferences: U S ( m ) = m and U R ( m ) =m, where m represents wealth.
Sal and Rick have the following preferences: US(m) =m and UR(m) =m, where m represents wealth. There is a gamble with two possible outcomes. For each $1 dollar bet, the gamble pays $1.69 in state A, and it pays $0.36 in state B. Suppose Sal and Rick have $1 each.
Are Rick and Sal risk averse, risk neutral or risk loving, repsectively?
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Risk Management And Insurance
Authors: Scott E Harrington, Greg Niehaus
2nd Edition
0072339705, 9780072339703
