Question: An investor has initial wealth w=2, and a utility function U(w)=1exp(Aw). A lottery has a payoff of 1 with probability p and a payoff of

An investor has initial wealth w=2, and a utility function U(w)=1exp(Aw).

An investor has initial wealth w=2, and a utility function U(w)=1exp(Aw). A lottery has a payoff of 1 with probability p and a payoff of -1 with probability (1p). (a) Suppose A=1 and p=0.85. Should the investor enter into the lottery? (b) Suppose A=1. Solve for the value of p such that the investor is indifferent between entering and not entering the lottery. (c) Suppose A=2 and p=0.85. Should the investor enter into the lottery? (d) Suppose A=2. Solve for the value of p such that the investor is indifferent between entering and not entering the lottery

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