Question: Please help me with this problem thank you very much!! . Show all calculations/result to FOUR PLACES AFTER THE DECIMAL POINT (except when all succeeding
Please help me with this problem thank you very much!!

. Show all calculations/result to FOUR PLACES AFTER THE DECIMAL POINT (except when all succeeding digits are zeros). Must Show all calculations/steps. Failure to do so will result in a score of "0" even final answer is correct. Geeta and Bred are very good friend, both of them are habitual gambler. They frequently gamble and most of the time they end up as a loser. One night both of them met with Zong and they discussed gambling and chance of winning or losing. Zong has knowledge of utility theory and, after the discussion he determines their individual preferences which can be modeled with the utility function Suppose Geeta and Bred is facing the following gamble where there is: 32 percent chances of winning $28490, 13 percent chances of winning $16478, 16 percent chances of winning or losing nothing, 14 percent chances of losing $7375, and 25 percent chances of winning $9350 (a) Zong determines the individual preferences of Geeta and modeled following utility function: U(x) = 3.395 - 2.62 e -x/36400 Calculate the overall expected utility of this gamble for Geeta and then find the certainty equivalent and the associated risk premium of this gamble for Geeta? ( b ) Zong determines the individual preferences of Bred and modeled following utility function: U(x) = 0.0568 * In (x + 11300) Calculate the overall expected utility of this gamble for Bred and then find the certainty equivalent and the associated risk premium of this gamble for Bred? State what type of risk behavior Bred is having? Why
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
