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An employee's utility is described by a log function of wealth: ln(W). His employer offered him a bonus scheme with two possible payoffs: $133,250 (with
An employee's utility is described by a log function of wealth: ln(W). His employer offered him a bonus scheme with two possible payoffs: $133,250 (with 60% prob.) or $70,000 (with 40% prob.). But, alternatively, he can ask for a sure bonus. How much should it be, at least? (1) $85,000; (2) $99,500; (3) $100,000; (4) $101,625; (5) $103,000; (6) $105,000; (7) $107,950;
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