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Consider a bet with a 60% chance of winning $7,000 and a 40% chance of losing $6,000. An individual's utility function is: u(w)= 1 e
Consider a bet with a 60% chance of winning $7,000 and a 40% chance of losing $6,000.
An individual's utility function is:
u(w)= 1 ew/10,000
where e 2.7183 and w is equal to wealth. His current wealth is 8,000. Will he accept the bet in order to maximize his expected utility? Provide complete solutions.
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