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Homework Questions

Homework Questions

  1. (P8-43) Jason Scott (see Problem 8-42) has decided to incorporate utility theory into his decision with his mortgage application. The following table describes Jason’s utility function:
Monetary Value Utility
-$4800 0.00
-$2900 0.10
-$2400 0.12
-$1000 0.15
-$500 0.19
$0 0.21
$1900 0.26
$2400 0.30
$4800 1.00

(a) How can you best describe Jason’s attitude toward risk? Justify your answer.

(b) Will the use of utilities affect Jason’s original decision in Problem 8-42?

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