Question: Question 3: Suppose Alice has the following vNM utility function: u( w) = VW, where we [0, +co) is the amount of money she has.

Question 3: Suppose Alice has the following vNM utility function: u(

Question 3: Suppose Alice has the following vNM utility function: u( w) = VW, where we [0, +co) is the amount of money she has. 1. Is Alice risk-averse, risk-neutral or risk-loving? Why? 2. Suppose Alice's initial wealth is 30 dollars. What is her expected utility when she has a 1/2 chance of winning 70 dollars, and 1/2 chance of losing 5 dollars? 3. What is Alice's certainty equivalent of the above lottery? 4. Given this vNM utility function, would Alice prefer to have 900 dollars for sure, or a lottery in which there is 1/2 chance of having 1600 dollars and 1/2 chance of having 400 dollars

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