Question: Luke's utility function is given by ()=1002 for 050 where represents total wealth in dollars. a. If Luke currently has $20, should he take a

Luke's utility function is given by ()=1002 for 050 where represents total wealth in dollars.

a. If Luke currently has $20, should he take a bet in which he will win $15 with probability 0.3 and lose $10 with probability 0.7, based on expected utility?

b. If Luke's total assets are currently $25, what is the certainty equivalent if he takes the bet in (a)? What is the risk premium he would pay for the bet?

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