Asked by Nayely Quintero on May 26, 2024
Verified
If Paul is risk loving and his basketball team has a probability of .5 of winning, then Paul would rather bet $10 on his team than $100.(When Paul bets X, he wins X if his team wins and loses X if his team loses.)
Risk Loving
A financial term describing an individual or entity's preference for taking risks, where the potential for higher gains outweighs the possibility of losses.
Probability
The measure of the likelihood that an event will occur, expressed as a number between 0 and 1.
- Detect and explain the qualities of individuals who are risk-friendly and those who are indifferent to risk.
Verified Answer
ZK
Zybrea Knight
Jun 02, 2024
Final Answer :
False
Explanation :
As a risk-loving individual, Paul would prefer to bet a larger amount ($100) rather than a smaller amount ($10) because he derives more utility from the potential higher payoff associated with the greater risk.
Learning Objectives
- Detect and explain the qualities of individuals who are risk-friendly and those who are indifferent to risk.
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