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2. Let R and R be the i.i.d. random rates of return on two assets (with positive expected values). Assume the agent has only



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2. Let R and R be the i.i.d. random rates of return on two assets (with positive expected values). Assume the agent has only two options: put all his wealth in one asset, or divide it among the two. (a) Show that a risk-averse agent (with u"

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a To show that a riskaverse agent will always divide her wealth between the two assets we can use the concept of indifference pricing Lets assume that ... blur-text-image

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