Question: Consider the following utility function U(x) = 2 log(1+i). where W> 0 is the initial wealth of an agent. (b) Consider a risky investment X


Consider the following utility function U(x) = 2 log(1+i). where W> 0 is the initial wealth of an agent. (b) Consider a risky investment X which yields the payoffs X = { -aW with probability b with probability 1 ) for 0 a . Show that this investment is worthwhile for the agent under the Principle of Expected Utility if ab b-a 0 is the initial wealth of an agent. (b) Consider a risky investment X which yields the payoffs X = { -aW with probability b with probability 1 ) for 0 a . Show that this investment is worthwhile for the agent under the Principle of Expected Utility if ab b-a
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