Use the following information to answer question. Assume an investor has the utility function W 1/3 ,

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Use the following information to answer question. Assume an investor has the utility function W1/3, where W is wealth. The state government issues a lottery ticket that pays the winner $300. The lottery ticket costs $1. The chance of winning the lottery is 1/200. The investor has $270 in original wealth.

Use the lottery case to show that the investor is risk-averse.

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Statistics For Business And Financial Economics

ISBN: 9781461458975

3rd Edition

Authors: Cheng Few Lee , John C Lee , Alice C Lee

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