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Business, 18.06.2020 22:57 heyhowdy

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. Both options have identical payoffs, so I am indifferent between the two options. B. The possibility of the $5,000 payoff is more valuable to me than the certain $2,500, I choose to flip a coin. C. The certain $2,500 is more valuable than the uncertain $5,000, I would choose the $2,500.

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