Question: 2.7 Hugo has a concave utility function of U(W) = W0.5. His only asset is shares in an Internet start-up company. Tomorrow he will learn

2.7 Hugo has a concave utility function of U(W) = W0.5. His only asset is shares in an Internet start-up company. Tomorrow he will learn the stock’s value. He believes that it is worth $144 with probability 23 and $225 with probability 13. What is his expected utility? What risk premium would he pay to avoid bearing this risk? (Hint: See Solved Problem 16.3.) m

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