Exercise 5.5. A riskaverse VNM decision maker harassing absolute risk aver sion. Her certainty equivalent for a lottery that pays $0 and $800 with probabilities U3 and 2/3, respectively, is $500. a. Which does she prefer, to get $400 and $1200 with probabilities U3 and 2/3, respectively, or to get $900 for sure? (Explain) b. How does she rank the lotteries in Figure E5.1? (Explain) Figure E5.1 $700 $1000 $800 $400 $1200