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An investor has the following preference curve (utility function). U(x) = (-0.03x2 + 4x + 147)/280 She modeled her decision problem in the decision tree
An investor has the following preference curve (utility function). U(x) = (-0.03x2 + 4x + 147)/280 She modeled her decision problem in the decision tree below: Contribution x ($K) c (0.5) 50 d a -15 A D 10 b (0.4) -30 e (0.4) 40 E f B -20 8 (0.3) 70 F -30 h 10 (a) Using above preference curve, find her preferred strategy. Show all computations. (b) Find the certainty equivalent and risk premium of this investment. (c) Describe the attitude of the investor towards risk. Justify your description. An investor has the following preference curve (utility function). U(x) = (-0.03x2 + 4x + 147)/280 She modeled her decision problem in the decision tree below: Contribution x ($K) c (0.5) 50 d a -15 A D 10 b (0.4) -30 e (0.4) 40 E f B -20 8 (0.3) 70 F -30 h 10 (a) Using above preference curve, find her preferred strategy. Show all computations. (b) Find the certainty equivalent and risk premium of this investment. (c) Describe the attitude of the investor towards risk. Justify your description
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