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(b) Consider a risky investment X which yields the payoffs S-aw X { = with probability bW with probability 2 1 2 for 0 a
(b) Consider a risky investment X which yields the payoffs S-aw X { = with probability bW with probability 2 1 2 for 0 a . Show that this investment is worthwhile for the agent under the Principle of Expected Utility if ab a . Show that this investment is worthwhile for the agent under the Principle of Expected Utility if ab
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