Compute also interpret decision maker a risk premium

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Reference no: EM1377781

Q. For the lottery having a payoff of $100 000 with a probability p also $0 with a probability (1-p), two decision makers expressed the subsequent indifference probabilities:

Profit Indifference probability (p)
Decision Maker A Decision Maker B
$75 000
$50 000
$25 000 0.80 0.60
0.60 0.30
0.30 0.15

(i) Find out the most preferred decision for each decision maker utilizing the expected utility approach.

(ii) Compute also interpret decision maker A's risk premium for a payoff of $50 000.

(iii) Explain why don't decision makers A also B select the same decision alternative?

Reference no: EM1377781

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