Determine the certainty equivalent wealth

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Reference no: EM133560501

Question: For an investor with the utility function U(W) = ln (W), the following options are available:

- A guaranteed wealth level of $100,000.

- An investment with potential wealth outcomes of $50,000 or $150,000. Both outcomes have equal probabilities.

a) Determine the Certainty Equivalent Wealth (CEW) amount.

b) Does this utility function indicate risk aversion, and why?

Note: Round your answers to two decimal places and please show your working.

Reference no: EM133560501

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