Please solve the last one Assuming you are risk neutral, first answer the following two questions about your preferences:Scenario A: You are given $5,000 and offered a choice between receiving an extra $2,500 with certainty or flipping a coin and getting $5,000 if heads or $0 if tails.Which option do you prefer?A The certain $2,500 is more valuable than the uncertain $5,000, I would choose the $2,500.B. Both options have identical payoffs, so I am indifferent between the two options.OC. The possibility of the $5,000 payoff is more valuable to me than the certain $2,500, I choose to fip a coin.Scenario B: You are given $10,000 if you will make the following choice: return $2,500 or flip a coin and return $5,000 if heads and $0 if tails. Which option do youprefer?A The certain loss of $2,500 is more painful than the possible loss of $5,000, I choose to flip a coin.B. The possibility of the loss of $5,000 is more painful to me than the certain loss of $2,500, I would choose the $2,500 certain loss.C. Both options have identical payoffs, so I am indifferent between the two options.Most people choose the sure $2,500 in the first case but flip the coin in the second. Why is this behavior is not consistent to a risk neutral person?O A. The behavior is not consistent because a risk neutral person is always able to choose the less risky option.B. The behavior is consistent because scenario B is riskier.C. The behavior is not consistent because scenario B is riskier.O D. The behavior is not consistent because the two experiments have equal payoffs.

A risk neutral person is one who makes the choice purely based on the payoff of each option.The…

Assuming you are risk neutral, first answer the following two questions about your preferences: Scenario A: You are given $5,000 and offered a choice between receiving an extra $2,500 with certainty or fipping a coin and getting $5,000 f heads or $O if tails. Which option do you prefer? A The certain $2,500 is more valuable than the uncertain $5,000, I would choose the $2,500. B. Both options have identical payoffs, so I am indifferent between the two options. OC. The possibility of the $5,000 payoff is more valuable to me than the certain $2,500, I choose to flip a coin. Scenario B: You are given $10,000 if you will make the following choice: returm $2.500 or flip a coin and return $5.000 if heads and so f tails. Which option do you prefer?

Assuming you are risk neutral, first answer the following two questions about your preferences: Scenario A: You are given $5,000 and offered a choice between receiving an extra $2,500 with certainty or fipping a coin and getting $5,000 f heads or $O if tails. Which option do you prefer? A The certain $2,500 is more valuable than the uncertain $5,000, I would choose the $2,500. B. Both options have identical payoffs, so I am indifferent between the two options. OC. The possibility of the $5,000 payoff is more valuable to me than the certain $2,500, I choose to flip a coin. Scenario B: You are given $10,000 if you will make the following choice: returm $2.500 or flip a coin and return $5.000 if heads and so f tails. Which option do you prefer?

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 19P: A firm has three investment alternatives. Payoffs are in thousands of dollars. a. Using the expected...

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