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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Financial Accounting The Impact On Decision Makers
Authors: Gary A Porter, Curtis L Norton
8th Edition
1111534861, 9781111534868
