Suppose an investor with $2 in capital has a logarithmicutility of wealth function:.The investor has the opportunity to buy a gamble similar to that described in the St. Petersburg paradox.The gamble is the same as that described in the St Paradox except that the maximum number of coin tosses is set to 10.That is, the gamble ends and the payoff is $0 if a tails lands on the 10^thcoin toss.Moreover, let us defineas the coin toss indicator.If heads lands on theth coin toss, the pay-off is $and the gamble ends. If a tails lands on coin tosses one through to nine, the coin is tossed again.

If the investor's initial capital was $50 rather than $2, would the investor be willing to pay a higher price or lower price for the gamble?How does your answer relate to the investor's level of risk aversion?You may use MS Excel.You may copy and paste a table from MS Excel as part of your working.