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Suppose you have an initial Wealth Wo = 100. You are forced to take a lottery, where you win 10 with probability 0.5 (with a

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Suppose you have an initial Wealth Wo = 100. You are forced to take a lottery, where you win 10 with probability 0.5 (with a new wealth of 110), and lose 10 with probability 0.5 (with a new wealth of 90). Given a Utility function U (W)=VW, what is the Pratt Arrow approximation for the risk premium you will pay to avoid the lottery? (a) 0 (b) 0.125 (c) 0.25 (d) 0.5 (e) 1

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