Question: Ramulu has the following utility function: U (w) = ln w where w = wealth What is the expected utility of the following prospects: (5

Ramulu has the following utility function:

U (w) = ln w where w = wealth

  1. What is the expected utility of the following prospects: (5 pts.)

P1 (0.5, 900, 700)

P2 (0.2, 12,000, 6,000)

P3 (0.8, 2,000, 5,000)

(Show calculations in the below empty space.)

What is the certainty equivalent of P3?

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