Which asset will the second consumer buy

Reference no: EM133629465

Financial Investment. Suppose a consumer has a Bernoulli utility function of money u (x) = px. There are two Önancial assets, both cost $100 available to the consumer, and the consumer is going to buy one of these two Önancial assets. Asset 1 pays $103 with certainty, while Asset 2 pays $110 with probability 0.95, and $0 with probability 0.05. Which asset will the consumer buy? Next consider another consumer whose Bernoulli utility function of money is u0 (x) = x2. Which asset will the second consumer buy?

Reference no: EM133629465

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