To justify an investment that involves an out-of-pocket cost of $100 and a 50/50 chance of payoffs of $0 or $250, the decision maker must have personal certainty equivalent adjustment factor that is:

Question

Quizplus · Accepted Answer

To justify the investment, the decision maker must be willing to take on the risk, which means they must have a personal certainty equivalent adjustment factor greater than 0.5 (the expected value of the investment). Based on the given options, the only choice that meets this criteria is C.

To Justify an Investment That Involves an Out-Of-Pocket Cost of $100