Re: jnu 2011

Posted by AJ on May 16, 2012; 4:57am
URL: http://discussion-forum.276.s1.nabble.com/jnu-2011-tp7503584p7561201.html

@ aastha, ritu, tim

Can u explain answer to this question.... I am getting 1. yes!   :(


Suppose the consumer's attitude towards risk is as follows :
He prefers an alternative which promises him an amount of Rs X with prob p and an amount of Rs Y(X>Y) with prob 1-p to an alternative which promises him an amt of Rs Z for sure if and only if Z<Y+(2p/3)(X-Y). An insurance co approaches in his youth and offers to pay Rs 7615 per month to the consumer in his middle age in exchange for his flow of income during that period. Will the consumer accept this offer ?
1. Yes
2. No
3. The consumer will be indifferent between accepting and declining the offer
4. The consumer's acceptance is a random event.