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Emily faces a gamble, namely, her risky income next year, which may be $0, $100, or $289, where all three possibilities are equally likely. She
Emily faces a gamble, namely, her risky income next year, which may be $0, $100, or $289, where all three possibilities are equally likely. She has (expected) utility function u(m) = Vm where m is the actual income that is realized. a. Calculate her expected utility from this gamble. b. Calculate her certainty equivalent and risk premium for this gamble. c. Characterize her preferences towards risk using one of the approaches discussed in lecture last week
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