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What is the maximum amount of insurance premium

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A. Prove that this function implies that Dipo's Dipo derives utility from income/wealth as given by the function: U (W) = ln(W): Answer the following: measure of relative risk aversion is constant. What is it equal to?

B. Dipo's current wealth is $5,000, but he is faced with 40% of the chance of losing 20% of his wealth. What is the maximum amount of insurance premium Dipo is willing to pay to avoid such risk?

Reference no: EM132766708

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