Would the certainty equivalent for prospect

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Reference no: EM131164491

An individual has the following utility function: u(w) = w^.5 where w = wealth.

a. Using expected utility, order the following prospects in terms of preference, from the most to the least preferred:

P1 (.8, 1000, 600)

P2 (.7, 1200, 600)

P3 (.5, 2000, 300)

b. What is the certainty equivalent for prospect P2?

c. Without doing any calculations, would the certainty equivalent for prospect P1 be larger or smaller? Why?

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Reference no: EM131164491

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