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What is the appropriate certainty-equivalent coefficient

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Question: Assume that a utility of zero is assigned to an amount of $0 and a utility of 1 00 to a gain of $ 1 00,000,000. A financial manager is indifferent between a 50 to 50 chance of winning $ 1 00,000,000 or nothing, and a certain amount of $30,000,000.

(a) What is his utility for $30,000,000?

(b) What is the appropriate certainty-equivalent coefficient, a, for the uncertain gain of $ 1 00,000,000?

Reference no: EM131749873

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