Answered You can hire a professional tutor to get the answer.

QUESTION

Suppose an individual faces the following lottery: 1) win $2000 with probability of 40%; 2) win $1000 with probability 40%; or 3) win $500 with...

Suppose an individual faces the following lottery: 1) win $2000 with probability of 40%; 2) win $1000 with probability 40%; or 3) win $500 with probability 20%. Assume the individual's utility function can be given as follows:

????(????)= √(1.7????+150)

a) (8 points) What is the individual's Risk Premium (RP) for this lottery?

b) (2 points) Would you describe this individual as Risk Averse, Risk Seeking, or Risk Neutral? Explain.

Please show work!!

Show more
LEARN MORE EFFECTIVELY AND GET BETTER GRADES!
Ask a Question