Suppose that a person must accept a gamble X of the following form: Pr(X = a) =
Question:
Pr(X = a) = p and Pr(X = 1− a) = 1− p, where p is a given number such that 0 < p < 1. Suppose also that the person can choose and fix the value of a (0 ≤ a ≤ 1) to be used in this gamble. Determine the value of a that the person would choose if his utility function was U(x) = log x for x >0.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 69% (13 reviews)
For any given values of a EUX p log a 1 p log1 a The maximu...View the full answer
Answered By
Carly Cimino
As a tutor, my focus is to help communicate and break down difficult concepts in a way that allows students greater accessibility and comprehension to their course material. I love helping others develop a sense of personal confidence and curiosity, and I'm looking forward to the chance to interact and work with you professionally and better your academic grades.
4.30+
12+ Reviews
21+ Question Solved
Related Book For
Probability And Statistics
ISBN: 9780321500465
4th Edition
Authors: Morris H. DeGroot, Mark J. Schervish
Question Posted:
Students also viewed these Statistics questions
-
Suppose that a person believes that his last years weight was normally distributed with mean of 165 lb and standard deviation of 5 lb. That is, the prior pdf of is N(165, 25), or () ~ N(165, 25). He...
-
Suppose that a person has a given fortune A > 0 and can bet any amount b of this fortune in a certain game (0 b A). If he wins the bet, then his fortune becomes A + b; if he loses the bet, then his...
-
Suppose that a person has a lottery ticket from which she will win X dollars, where X has the uniform distribution on the interval [0, 4]. Suppose also that the persons utility function is U(x) = x...
-
Following are financial statements (historical and forecasted) for the Global Products Corporation. A. Assume that the cash account includes only required cash. Determine the dollar amount of equity...
-
Refer to the information in the preceding problem, but now assume that the tax rate is 30% and that you are not ignoring taxes. Equipment is subject to 20% CCA rate declining balance for income tax...
-
Identify and discuss any professional conduct issues in the following independent scenarios. a. Adnan Hussein is a CPA working for a national firm. He is at his desk when he overhears his colleague...
-
What the different types of settlement agreements are?
-
The comparative balance sheets of Susan Saboda Design Studio, Inc., at June 30, 2012 and 2011, and transaction data for fiscal 2012, are as follows: Transaction data for the year ended June 30, 2012,...
-
Perform a first derivative test on the function f(x) = 2x3 +9x2-24x+3; [-4,5] a. Locate the critical points of the given function. b. Use the First Derivative Test to locate the local maximum and...
-
Match the following and select the correct option. Prims's algorithm Dynamic programming 1 a Binary search algorithm 2 b Divide and conquer programming Quick sort algorithm Greedy programming ...
-
Consider a utility function U for which U(0) = 5, U(1) = 8, and U(2) = 10. Suppose that a person who has this utility function is indifferent to either of two gambles X and Y, for which the...
-
Determine the value of a that a person would choose in Exercise 7 if his utility function was U(x) = x1/2 for x 0.
-
The Southern Rail Company ships coal by rail from three coal mines to meet the demand requirements of four coal depots. The following table shows the distances from the mines to the various depots...
-
Golden Cumulus Corp., a commodities trading company, reported interest expense of $19 million and taxes of $6 million. Interest payable increased by $3 million, and taxes payable decreased by $4...
-
In order to assess a companys ability to fulfill its long-term obligations, an analyst would most likely examine: A. activity ratios. B. liquidity ratios. C. solvency ratios.
-
Which of the following is most likely to appear in the operating section of a cash flow statement under the indirect method? A. Net income. B. Cash paid to suppliers. C. Cash received from customers.
-
An analyst compiles the following data for a company: Based only on the information above, the most appropriate conclusion is that, over the period FY13 to FY15, the companys: A. net profit margin...
-
When a company buys shares of its own stock to be held in treasury, it records a reduction in: A. both assets and liabilities. B. both assets and shareholders equity. C. assets and an increase in...
-
The graph below best represents the relationship between concentration and temperature for which of the following substances? F. HCl G. NaNO 3 H. NaCl J. KCl Concentration (g solute/100 g water) 0 20...
-
Do the three planes x + 2x + x 3 = 4, X X 3 = 1, and x + 3x = 0 have at least one common point of intersection? Explain.
-
An individual who has automobile insurance from acertain company is randomly selected. Let Y be the number of moving violations for which the individual was cited during the last 3 years. The pmf of...
-
Refer to Exercise 12 and calculate V(Y) and Y. Then determine the probability that Y is within 1 standard deviation of its mean value.
-
A certain brand of upright freezer is available in three different rated capacities: 16 ft3, 18 ft3, and 20 ft3. Let X 5 the rated capacity of a freezer of this brand sold at a certain store. Suppose...
-
After a default and pursuant to an application by the first mortgage holder on title, the court will issue a preliminary order of foreclosure, setting a time limit within which time the mortgage must...
-
Imagine that there are three residents of Austin, and that each of them has an elderly grandmother who also lives in town. Each of the grandchildren faithfully visits his or her grandmother for three...
-
1. Sarah purchased a new smartphone from a local electronics store. The seller assured me that this phone will have long lasting battery usage. After a few weeks of use, the phone starts experiencing...
Study smarter with the SolutionInn App