Nubia maximizes U(Y ) = ln(Y ) and is exposed to the lottery L = (900, 900;
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Question:
Nubia maximizes U(Y ) = ln(Y ) and is exposed to the lottery L = (900, −900; .5). An insurance policy to remove the risk of the lottery costs P = 400.
What amount of wealth Y that Nubia holds implies she is indifferent between the lottery and paying the premium?
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