solution

The chief executive officer of a publishing company says she is indifferent

between the certainty of receiving $7,500 and a gamble where there is a 0.5

chance of receiving $5,000 and a 0.5 chance of receiving $10,000. Also, she

says she is indifferent between the certainty of receiving $10,000 and a gamble

where there is a 0.5 chance of receiving $7,500 and a 0.5 chance of receiving

$12,500. a. Draw (on a piece of graph paper) four points on the utility function of

this publishing executive. b. Does she seem to be a risk averter, a risk lover, or risk-neutral? Explain.