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Suppose Ryan is risk averse and makes his decisions based on the expected value of the utility function defined by U(W) 2 W005 i.e., utility,
Suppose Ryan is risk averse and makes his decisions based on the expected value of the utility function defined by U(W) 2 W005 i.e., utility, U(W), is the square root ofW where W denotes wealth. Ryan is trying to decide whether to accept a job (Job 1) that pays $45,000 or an alternative job (Job 2) that pays $25,000 or $65,000 with some probability on each outcome. In terms of expected utility calculations, what approximate probability must we put on receiving $65,000 for Ryan to be indifferent between Job 2 and Job 1. You should briey explain the steps you take to arrive at your
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