Consider the following two annual compensation packages. Package 1: $60,000 with 100% probability Package 2: $45,000...

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Consider the following two annual compensation packages. Package 1: $60,000 with 100% probability Package 2: $45,000 with 40% probability, and $70,000 with 60% probability a) What is the expected value of the two packages? (Write the package name and the expected value of the package) (2 marks) b) What is the expected utility associated with the two packages? (Write the package name and the expected utility of the package) (2 marks) c) Compute what the probabilities associated with Package 2 should be in order for both Package 1 and Package 2 to have the same expected utility. (2 marks) Consider the following two annual compensation packages. Package 1: $60,000 with 100% probability Package 2: $45,000 with 40% probability, and $70,000 with 60% probability a) What is the expected value of the two packages? (Write the package name and the expected value of the package) (2 marks) b) What is the expected utility associated with the two packages? (Write the package name and the expected utility of the package) (2 marks) c) Compute what the probabilities associated with Package 2 should be in order for both Package 1 and Package 2 to have the same expected utility. (2 marks)

Answer rating: 100% (QA)

a The expected value of Package 1 is simply 60000 The expected value of Package 2 is 45000 x 04 7000... View the full answer