An investor has a base (10 log) utility function: (U(x)=log _{10}(x)). Investment 1 has payoff ((1,100)) with

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An investor has a base $10 \log$ utility function: $U(x)=\log _{10}(x)$. Investment 1 has payoff $(1,100)$ with probabilities $(0.8,0.2)$. Investment 2 has payoff $(10,1000)$ with probabilities $(0.99,0.01)$.

(a) Which investment is mean-variance dominant?

(b) Which investment has higher expected utility?

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Mathematical Techniques In Finance An Introduction Wiley Finance

ISBN: 9781119838401

1st Edition

Authors: Amir Sadr

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Question Posted: Feb 27, 2024 03:11 AM

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An investor has a base (10 log) utility function: (U(x)=log _{10}(x)). Investment 1 has payoff ((1,100)) with

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Investment Analysis a MeanVariance Dominance To determine meanvariance dominance we need to compare ...View the full answer

Mathematical Techniques In Finance An Introduction Wiley Finance

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