Purchase Solution

Certainty equivalent coefficient

Not what you're looking for?

Ask Custom Question

An individual is indifferent between a certain payment of $20 and a game that will pay $50 or nothing with equal probabilities. The individual has a certainty equivalent coefficient of what?

0.20

0.40

0.80

2.50

Purchase this Solution
Solution Summary

The solution provides a brief answer with some explanation. The explanation is simple and easy to understand.

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Certainty Equivalent Method

    equivalent coefficient NPV is higher in case of Project A, it should be selected.

  • Project's Net Present Value of Cash Flows

    The certainty-equivalent coefficient assumes a value between 0 and 1, and varies inversely with risk. Decision-maker subjectively or objectively establishes the coefficients.

  • Risk in setting different NPV requirements

    The certainty-equivalent coefficient can be determined as a relationship between the certain cash flows and the risky cash flows.

  • Uncertainty is Included in Cash Flows

    The following are the advantages of the certainty equivalent cash flow approach Reduce the forecasts of cash flows to some conservative levels. The certainty?equivalent coefficient assumes a value between 0 and 1, and varies inversely with risk.

  • coefficient of variation

    b. certainty equivalent. c. coefficient of correlation. d. coefficient of variation.

  • Scenario analysis and risk-adjusted NPV

    The certainty-equivalent coefficient can be determined as a relationship between the certain cash flows and the risky cash flows.

  • Correct capital budgeting criterea

    The certainty-equivalent coefficient can be determined as a relationship between the certain cash flows and the risky cash flows.

  • The certainty-equivalent approach of capital Budgeting

    The certainty?equivalent coefficient assumes a value between 0 and 1, and varies inversely with risk. Decision-maker subjectively or objectively establishes the coefficients. The certainty?

  • Certainty Equivalent Cash Flow

    In this example, the Certainty Equivalent cash flow one year from now is: Certainty Equivalent Cash Flow = 250/1.0747 = $232.62 Present Value of the Certainty equivalent = 232.62/1.07 = $217.40 The solution computes Certainty Equivalent Cash Flow

View More Related Solutions