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1. The coin toss bet, betting with all her net worth can be viewed as an investment with all her savings. Please calculate the expected
1. The coin toss bet, betting with all her net worth can be viewed as an investment with all her savings. Please calculate the expected return and the return variance of this bet or investment in step 2. 2. If in an alternative world, Carol accepts the bet in step 2. What range does her risk aversion fall in ? Is she a mean variance investor ? Hints : when she rejects the bet, the utility value derived from this process is zero. 3. In step 3, Carol decided that she has to be paid at least $20 for her to take the bet. Please calculate her risk aversion coefficient A.
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