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Determine certainty equivalent and risk premium

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Reference no: EM132766727

George is an expected utility maximizer with a utility u(x)=x (x raised to the power 0.5 ). We assume that she has no initial wealth.

1. Briefly explain what you can learn about her risk attitude from the shape of Hillary's utility function .

2. Determine his certainty equivalent and risk premium for lottery A that pays 100$ dollars with probability of 80% and 0$ otherwise.

Reference no: EM132766727

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