Mark has the following utility function: U = ln(w) where w denotes the wealth. Mark has...

 

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Mark has the following utility function: U = ln(w) where w denotes the wealth. Mark has the chance to play in the following lottery: with probability 0.58 the lottery gives $43,750 and with the complement probability (1-0.58), the lottery gives $-832. Assume that Mark starts with a wealth of 2,573. Compute Mark's expected utility from playing the lottery. Mark has the following utility function: U = ln(w) where w denotes the wealth. Mark has the chance to play in the following lottery: with probability 0.58 the lottery gives $43,750 and with the complement probability (1-0.58), the lottery gives $-832. Assume that Mark starts with a wealth of 2,573. Compute Mark's expected utility from playing the lottery.

Answer rating: 100% (QA)

To compute Marks expected utility from playing the lottery we need to calculate the weighted average ... View the full answer