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1. (6 points) A riskaverse individual is offered a choice between a gamble that pays $1000 with a probability of 25% and $100 with a
1. (6 points) A riskaverse individual is offered a choice between a gamble that pays $1000 with a probability of 25% and $100 with a probability of 75%, or a sure payment of $325. (a) (1 point) Which would he choose? (b) (1 point) Which would he choose if the sure payment was $320 instead of $325? (0) (2 points) If this individual has a utility function u(:l;) = ln :3, would he prefer the payment of $320 or the gamble? (d) (2 points) In the CRRA utility family u($) = 931\"\". If this individual has a 17 utility where 'y = 0.01, would he prefer the payment of $320 or the gamble
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