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Ari's utility function is =2L^0.1. , he is considering investing his money and has the choice to put his money into a risk-free investment that
Ari's utility function is =2L^0.1. , he is considering investing his money and has the choice to put his money into a risk-free investment that will pay him $5,200 next year or invest into riskier assets that are expected to earn $8,000 if the economy expands and $2,000 otherwise. There is a 35% probability of an expansion this coming year.
Where will Ari invest his money?
What is Ari's risk premium?
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