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Q4 (10 marks). An investor follows prospect theory and faces the lottery L=(15,21;21,31;27,61), which represents the returns and the associated probabilities from a portfolio of

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Q4 (10 marks). An investor follows prospect theory and faces the lottery L=(15,21;21,31;27,61), which represents the returns and the associated probabilities from a portfolio of assets. The utility function for outcomes of the decision maker is piecewise linear and given by v(x)=x2.5(x)ifx0(domainofgains)ifx

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