Assignment
Jason Scott has decided to incorporate utility theory into his decision with his mortgage application. The following table describes Jason's utility function:
|
Monetary Value
|
Utility
|
|
-$4800
|
0.00
|
|
-$2900
|
0.10
|
|
-$2400
|
0.12
|
|
-$1000
|
0.15
|
|
-$500
|
0.19
|
|
$0
|
0.21
|
|
$1900
|
0.26
|
|
$2400
|
0.30
|
|
$4800
|
1.00
|
(a) How can you best describe Jason's attitude toward risk? Justify your answer.
(b) Will the use of utilities affect Jason's original decision?