Question: Question 1 please show all working out let u(w) = ln(w+2) a) calculate Expected utility for the following - $2 for sure - a 3/4
Question 1 please show all working out
let u(w) = ln(w+2)
a) calculate Expected utility for the following
- $2 for sure
- a 3/4 chance of $3 and a 1/4 chance of $0.10
- $2 million for sure
- 3/4 chance of $3 million and a 1/4 chance if $0.10
b) determine whether preferences consistent with this utility function are risk averse, risk neutral or risk loving
c) for the second gamble ( a 3/4 chance of $3 and a 1/4 chance of $0.10) find the certainty equivalent under this utility function.
if possible, grateful if you could also draw the graph for this utility function.
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