You have the following two offers. Offer A: You either win $10k or lose $10k with...

Question

Question

You have the following two offers.

Offer A: You either win $10k or lose $10k with 50/50 chance (a coin toss)

Offer B: You get nothing for sure.

Preference #1: Prefer A

Preference #2: Prefer B

Preference #3: Indifferent to A and B

1. What preference represents risk-averse among the preferences 1, 2, and 3?

2. What preference represents risk-loving among the preferences 1, 2, and 3?

3. What preference represents risk-neutral among the preferences 1, 2, and 3?

Answer 1

Answer #1

1. Preference representing risk-averse among three preferences is Preference #2: Prefer B

2. Preference representing risk -loving among three preferences is Preference #1: Prefer A

3.Preference representing risk-neutral among three preferences is Preference #3: Indifferent to A and B

Answer 2

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