Question: 15.14. You have a utility function given by U ! 10 lnI. where I represents the monetary payoff from an investment. You are considering making

15.14. You have a utility function given by U ! 10 lnI.

where I represents the monetary payoff from an investment. You are considering making an investment which, if it pays off, will give you a payoff of $100,000, but if it fails, it will give you a payoff of $20,000. Each outcome is equally likely. What is the risk premium for this lottery?

Does the Utility Which Lottery Function Exhibit Risk Expected Utility Expected Utility Gives the Highest Aversion, Risk Neutrality, Utility Function Lottery A Lottery B Expected Utility? or Risk Loving?

U ! I 2 10000 U ! I U ! 1001I

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