A decision maker with a quadratic utility function of the form (13.12) is offered the following lottery:

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A decision maker with a quadratic utility function of the form (13.12)

is offered the following lottery:

Probability Payoff 0.20 $10,000 0.50 $50,000 0.30 $100,000 If the risk aversion coefficient is λ = 1/150,000:

• What is the certainty equivalent of the lottery?

• What is the risk premium?

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Quantitative Methods An Introduction For Business Management

ISBN: 1579

1st Edition

Authors: Paolo Brandimarte

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Question Posted: Jul 12, 2024 02:04 AM

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A decision maker with a quadratic utility function of the form (13.12) is offered the following lottery:

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Quantitative Methods An Introduction For Business Management

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