Question
Suppose the function U(y) is a von Neumann- Morgenstern utility Function and satisfies the expected utility property with y R+. Consider the replacement utility function
Suppose the function U(y) is a von Neumann- Morgenstern utility Function and satisfies the expected utility property with y R+. Consider the replacement utility function given by
V (y) = a U(y) + b , a > 0
Show that the risk premium and certainty equivalent are the same for U(y) and
V (y) (3)
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Managerial Accounting An Integrative Approach
Authors: C J Mcnair Connoly, Kenneth Merchant
2nd Edition
099950049X, 978-0999500491
