Question
Consider the following utility functions for wealth w: (i) u(w) = 3w, (ii) u(w) = w 1/3 , (iii) u(w) = w + sqrt(w), (iv)
Consider the following utility functions for wealth w: (i) u(w) = 3w, (ii) u(w) = w1/3, (iii) u(w) = w + sqrt(w), (iv) u(w) = w*sqrt(w). Which of these is most risk-averse (has the highest Arrow-Pratt coefficient of absolute risk aversion) at w = 1?
A) (i)
B) (ii)
C) (iii)
D) (iv)
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Business Statistics For Contemporary Decision Making
Authors: Ken Black
9th edition
978-1-119-3208, 9781119334781, 1119334780, 1119320895, 978-1119320890
