Problem 1 An agent has a utility function over money of u (m) = log (10 + m). Consider the following two lotteries: 1 1
Problem 1 An agent has a utility function over money of u (m) = log (10 + m). Consider the following two lotteries: 1 1 B : (5a 1_51) (a) Calculate the expected utility of each lottery. Which lottery does the agent prefer? (b) Calculate the certainty equivalent of the two lotteries. (c) Calculate the risk premium of the two lotteries
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