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Decision Making Under Uncertainty
a. Yes, Amiko is risk-averse. She is willing to take on more risk only if it is associated with a sufficiently higher expected return.
b. Amiko's certainty equivalent is $15,000. She would be willing to accept a certain return of $15,000 (the vertical intercept of her indifference curve) in lieu of her current risky investment that has an expected return of $25,000 and a standard deviation of $10,000.
c. The risk premium on Amiko's current investment is $10,000. This is the difference in the expected return of her risky investment and the risk-free investment (certainty equivalent). The $10,000 risk premium is what it takes in expected return to make her indifferent between the risk and risk-free investments.
Consolidated Sugar corporation sells granulated sugar to both retail grocery chains and commercial users the demand function for each of these markets is;
To be successful, you have to be cheaper. Take an SBA (Small Business Administration) course, and thy will tell you that if your only competitive point is to be cheaper, don’t bother starting your business.
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