Question: For an investor with the utility function U(W) = ln (W), the following options are available: - A guaranteed wealth level of $100,000. - An

For an investor with the utility function U(W) = ln (W), the following options are available:

- A guaranteed wealth level of $100,000.

- An investment with potential wealth outcomes of $50,000 or $150,000. Both outcomes have equal probabilities.


a) Determine the Certainty Equivalent Wealth (CEW) amount. (5 marks)

b) Does this utility function indicate risk aversion, and why? (2 marks)

Note: Round your answers to two decimal places and please show your working.

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