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Risk and Time Preference Quiz

This document contains 5 questions related to economics and time/risk concepts. Question 1 asks about the expected value (EV) of a $200 wager that could win $300 or lose the $200 bet. Questions 2 and 3 present investment options with different risk percentages and ask about the utility function and risk preferences. Question 4 discusses discounting of future rewards. Question 5 provides a discount rate example about choosing 1 marshmallow now vs 2 later.

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29 views

Risk and Time Preference Quiz

This document contains 5 questions related to economics and time/risk concepts. Question 1 asks about the expected value (EV) of a $200 wager that could win $300 or lose the $200 bet. Questions 2 and 3 present investment options with different risk percentages and ask about the utility function and risk preferences. Question 4 discusses discounting of future rewards. Question 5 provides a discount rate example about choosing 1 marshmallow now vs 2 later.

Uploaded by

BolWol
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Economics

Time and Risk

Dept. of Economics @ NCKU


Weng, Ming-Hung
Q1
A $200 wager on next card and
win ($300) on Red
lose bet on Black.

Its EV is?
1. $0; 2. $50; 3. 100; 4; $200
Q2
+% 0 5 8 10 12 15 20
u(+%) 0 62 82 88 92 98 100
1. +8% (50%) or +12% (50%);
2. +5% (50%) or +15% (50%);
3. +0% (50%) or +20% (50%);
The agent with specified utility function
will prefer investment project ___.
Q3
+% 0 5 8 10 12 15 20
u(+%) 0 62 82 88 92 98 100
1. +8% (50%) or +12% (50%);
2. +5% (50%) or +15% (50%);
3. +0% (50%) or +20% (50%);
An agent preferring investment project 1 is
considered risk ___
1. averse; 2. neutral; 3. loving
Q4

now now

As long as monkeys
give discounts (say
later 0.5) to future rewards, later
they will prefer
Q5
Suppose each marshmallow has a utility of 5.
If a person has a discount rate 0.8 for what is
happening 10 minutes later, he would choose
1. one marshmallow now
2. 2 marshmallows in 10 minutes
3. either one

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