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3 Investment Fee Suppose you are a hedge fund manager and you have two customers A and B. You have a good investment plan whose
3 Investment Fee Suppose you are a hedge fund manager and you have two customers A and B. You have a good investment plan whose returns from $100,000 can be $130,000 with 20% chance; $110,000 with 70% chance; and $20,000 with 10% chance (which is a disaster case). You know your customers have the same CRRA utility U(W) Wi-a 1-a' but different degrees of risk aversion: a = 0.1 for Customer A and a = 0.2 for Customer B (Customer B is more risk cautious than Customer A). You are risk neutral, by the way. How much investment fees will you ask for Customers A and B, respectively? 3 Investment Fee Suppose you are a hedge fund manager and you have two customers A and B. You have a good investment plan whose returns from $100,000 can be $130,000 with 20% chance; $110,000 with 70% chance; and $20,000 with 10% chance (which is a disaster case). You know your customers have the same CRRA utility U(W) Wi-a 1-a' but different degrees of risk aversion: a = 0.1 for Customer A and a = 0.2 for Customer B (Customer B is more risk cautious than Customer A). You are risk neutral, by the way. How much investment fees will you ask for Customers A and B, respectively
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