Question
Gabbie has to decide between the following two choices: Option 1: Get $342 with probability 45.88%, and $39.60 with the complement probability. Option 2: Get
Gabbie has to decide between the following two choices:
Option 1: Get $342 with probability 45.88%, and $39.60 with the complement probability.
Option 2: Get $95.88 with 100% probability.
Her utility function is:
U = e W 100
where W is her wealth.
Compute her Certainty Equivalent from Option 1.
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Principles of Managerial Finance
Authors: Chad J. Zutter, Scott B. Smart
15th edition
978-0134476315
