s87-dt-content-rid-105972739 1/courses/2017Fall-T-ECN315-80398/tinalA pdf 25. (p

Question

s87-dt-content-rid-105972739 1/courses/2017Fall-T-ECN315-80398/tinalA pdf 25. (points) Jonmy is risk avense. Jonny is given three options: for certain Gamble A: $100 with probsbility 0.5 and $0 with probability 0.5 Gamble B: $200 with probability 0.25 and $0 with probability 0.5 Jonny chooses A. Gamble A B. Gamble A or B, but not the $50 C. Gamble B D. $50 for certain E. be is indifereet between all three options 26. (e poists) In response to a one percentage point decrease in yield to maturity A. the price of short-term securities tall by a greater percentage than the price of long-term B. the price of short-term securities rise by a greater percentage than the price of long-term C. the price of short-term securities fll by a lower percentage than the price of long term D. the price of short-term securities rise by a lower percentage than the price of long-term securities securities secturities. securities 27. (4 points) Write down all the ways the Federal Reserve could use its tools to increase in the money supply

Explanation / Answer

25. Since the expected wealth is equal in all the 3 cases i.e. $50 and Jonny is risk averse he will not choose any gamble and accept $50 for certain.

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