For questions Irma has the option of buying a stock. If the price goes up her 19 - 20: wealth increases from 60 to 90. If it goes down her wealth decreases from 60 to 30. Utility, U U(90) = 120 U(60) = 100- -= = U(48) = 85 U (30) = 50- 30 48 60 90 Wealth, S 19 2 Irma's subjective probability is 50% that the price goes up. $30 Assume Irma's utility function is given by the blue curve. $18 A $12 Given that, Irma declines to purchase the stock. If you paid $8 V Irma to buy the stock, how much would you have to pay her? 20 2 What subjective probability for a price increase would it take 517 for Irma to buy the stock? 3/4 A 3/5