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Consider an expected utility maximising agent with square-root utility over final wealth in dollars (W) such that U(W) = W^0.5. The agent has initial wealth
Consider an expected utility maximising agent with square-root utility over final wealth in dollars (W) such that U(W) = W^0.5. The agent has initial wealth of $100. A security priced at $100 offers payoff of either $0 or $x with equal probability. Ignore the time value of money. What is the lowest (x) at which the agent would be willing to invest in the security?
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