A manager must determine which of two products to market. From market studies the manager constructe
Question: A manager must determine which of two products to market. From market studies the manager constructed the following payoff matrix of the present value of all future net profits under all the different possible states of the economy:
| STATE OF THE ECONOMY | PROBABILITY | PROFIT |
| PRODUCT 1 | ||
| BOOM | 0.2 | $50 |
| NORMAL | 0.5 | 20 |
| RECESSION | 0.3 | 0 |
| PRODUCT 2 | ||
| BOOM | 0.2 | $30 |
| NORMAL | 0.4 | 20 |
| RECESSION | 0.4 | 10 |
The manager’s utility for money function is: U = 100M – M2
Where M refers to dollars of profit. (a) Is the manager a risk seeker, risk neutral, or risk averter? Why?
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Answer: The solution consists of 1 page
Deliverables: Word Document
Deliverables: Word Document
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