Can you please help to Calculate b 1) You are offered a ticket in a lottery that

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Can you please help to Calculate b

1)You are offered a ticket in a lottery that will pay off either $50 with probability 0.05, or $750 with probability 0.05, otherwise it will pay off nothing. You are unsure whether the ticket is worth the purchase price.

a)What is the expected value of the lottery? i can solve this a -answer should be 40

b) Suppose that you hold the utility function , and you have initial wealth of . What is your certainty equivalent of this lottery?

Related Book For answer-question

Contemporary Financial Intermediation

ISBN: 9780124052086

4th Edition

Authors: Stuart I. Greenbaum, Anjan V. Thakor, Arnoud Boot

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Posted Date: May 10, 2024 07:59 AM

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Can you please help to Calculate b 1) You are offered a ticket in a lottery that

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To calculate the certainty equivalent of the lottery given the utility function UW sqrtW and an init... View the full answer

Contemporary Financial Intermediation

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