Any risk-averse individual would always:
A) take a 10% chance at $100 rather than a sure $10.
B) take a 50% chance at $4 and a 50% chance at $1 rather than a sure $1.
C) take a sure $10 rather than a 10% chance at $100.
D) take a sure $1 rather than a 50% chance at $4 and a 50% chance at losing $1.
E) do C or D above.

Question

Quizplus · Accepted Answer

A risk-averse individual would prefer the sure option rather than taking a chance with a low probability of a high reward. Option C offers a guaranteed $10, which is more attractive to a risk-averse individual than a 10% chance at $100 in option A. Option D involves the possibility of losing money, which is even riskier, so option C is the better choice.

Any Risk-Averse Individual Would Always