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(10 points) An investor wants to invest $10,000 and uses the utility function U(t) = ln(t) to make a decision. a) Does the utility function
(10 points) An investor wants to invest $10,000 and uses the utility function U(t) = ln(t) to make a decision. a) Does the utility function correspond to a risk-averse, risk-neutral or risk-loving investor? b) The investor has two investment options: Option 1: Either has a return of 9% (with probability 30%) or a return of 1% (with probability 70%) Option 2: A risk-free return of 2%. Which option will the investor choose? c) What is the certainty equivalent of Option 1? d) Compare the investment decision of an investor with the utility function V(t) = ln(t?) to those made by the investor with utility function U(t). Will they always make the same investment decision or are there examples where they make different decisions
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