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3. (40 marks) Jane owns a house worth $100,000. Assume that her wealth consists entirely of the house. In any given year, there is a

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3. (40 marks) Jane owns a house worth $100,000. Assume that her wealth consists entirely of the house. In any given year, there is a 2% percent chance that the house will burn down. If it does, its scrap value will be $30,000. Jane's utility function is U(w) = 2vw. a. Draw Jane's utility function (plotting utility against wealth). b. Show whether Jane is risk averse

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