Question: Problem 1. You have a logarithmic utility function U(W)=lnW, and your current level of wealth is $5,000 (a) Suppose you are exposed to a situation

Problem 1. You have a logarithmic utility function U(W)=lnW, and your

Problem 1. You have a logarithmic utility function U(W)=lnW, and your current level of wealth is $5,000 (a) Suppose you are exposed to a situation that results in a 50/50 chance of winning or losing $1,000. If you can buy a financial product that completely removes the risk (both upward and downward) for a fee of $125, will you buy it or take the gamble? (b) Suppose you accept the gamble outlined in (a) and lose, so that your wealth is reduced to $4,000. If you are faced with the same gamble and have the same offer of product as before, will you buy this the second time around

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