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Suppose that a person maximizes his expected utility, with the utility function given by () = z 1/2 . Suppose that the person engages in

Suppose that a person maximizes his expected utility, with the utility function given by () = z1/2. Suppose that the person engages in a risky venture which leaves him with either $81 or $25, with equal probability. What is the certainty equivalent of this business venture? What is the risk premium?

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