Bill owns an export business.The expected profit from his business is $100,000 a year.For every 1% increase in the value of the Japanese yen relative to the dollar, its profits increase by $20,000.Bill plans to buy one of two firms.One is an import business which returns an expected profit of $70,000.For every 1% increase in the value of the Japanese yen relative to the dollar, the profits of this firm shrink by $5,000.The second is a safe domestic firm which is certain to yield him $70,000 a year.The two firms cost the same.If Bill is risk averse,
A)he should buy the domestic firm.
B)he should buy the import firm.
C)he should buy half of each of these two firms.
D)it doesn't matter which he buys.
E)he should buy 80% of the domestic firm and 20% of the import firm.

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The Answer of Bill owns an export business.The expected profit from his business is $100,000 a year.For every 1% increase in the value of the Japanese yen relative to the dollar, its profits increase by $20,000.Bill plans to buy one of two firms.One is an import business which returns an expected profit of $70,000.For every 1% increase in the value of the Japanese yen relative to the dollar, the profits of this firm shrink by $5,000.The second is a safe domestic firm which is certain to yield him $70,000 a year.The two firms cost the same.If Bill is risk averse,
A)he should buy the domestic firm.
B)he should buy the import firm.
C)he should buy half of each of these two firms.
D)it doesn't matter which he buys.
E)he should buy 80% of the domestic firm and 20% of the import firm.

Bill Owns an Export Business