Question: help me a b c d e 1 3.7 A decision maker's assessed risk tolerance is $1210. Assume that this individual's pref- erences can be
help me a b c d e

1 3.7 A decision maker's assessed risk tolerance is $1210. Assume that this individual's pref- erences can be modeled with an exponential utility function. a Find U($ll)00), U($800), U($0). and U(31250). b Find the expected utility for an investment that has the following payoff distribution: P($1000) = 0.33 P($800) = 0.21 P($0) = 0.33 P($ 1250) = 0.13 c Find the exact certainty equivalent for the investment and the risk premium. d Find the approximate certainty equivalent using the expected value and variance of the payoffs. e Another investment possibility has expected value $2400 and standard deviation $300. Find the approximate certainty equivalent for this investment
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
