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The certainty equivalent of a gamble is defined to be the amount of money which, if you were promised it with certainty, would result in

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The certainty equivalent of a gamble is defined to be the amount of money which, if you were promised it with certainty, would result in you being indifferent between it and the gamble. Suppose that there are two pos- sible states of the world; state one and state two. State one occurs with probability p and state two occurs with probability 1-p, where 0

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