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Jack has two options next year, Job A and Job B. The earnings in the two jobs differ and are random. In Job A, earnings
Jack has two options next year, Job A and Job B. The earnings in the two jobs differ and are random. In Job A, earnings will be $25 with probability 1/2, $36 with probability 116, or $81 with probability 1/3. In Job B, earnings will be $36 with probability 2f3 or $64 with probability 1/3. a. IfJack has preferences over earnings given by 11(8) = VIE, where 9 denotes actual earnings, which job should he take and why? b. Calculate the Certainty Equivalents and risk premiums for Jack for both .lob A and Job B
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