Utility index , Applied Statistics

Assignment Help:

If the economy does well, the investor's wealth is 2 and if the economy does poorly the investor's wealth is 1. Both outcomes are equally likely. The investor is offered to invest in shares of a project that gains 3=2 if the economy does well and loses 1 if the economy does poorly. Therefore, if the investor obtains α shares of this project his wealth is 2 + 3α/2

with probability 1/2 and 1= α with probability 1/2. The investor is an expected utility maximizer with utility index u(z) = ln z. What is the optimal α for this investor? ( α must be between 0 and 1).


Related Discussions:- Utility index

Evaluate gross reproduction rate, Evaluate Gross Reproduction Rate: Fr...

Evaluate Gross Reproduction Rate: From the data given below compute : i)   General  Fertility  Rate ii)  Specific  Fertility  Rate iii)  Total  Fertility  Rate iv)

Aviation legislation - SUPPLEMENTAL TYPE CERTIFICATION, JAR 21 SUPPLEMENTAL...

JAR 21 SUPPLEMENTAL TYPE CERTIFICATION JAR 21 Part E introduces the need for Supplemental Type Certification when a manufacturer wishes to make major changes to the Type Desig

Sample standard deviation, Sample Standard Deviation So far, we discu...

Sample Standard Deviation So far, we discussed the population standard deviation. Now, let us switch to sample standard deviation(s) that is analogous to the population stand

Redundancy analysis, In reduced rank regression (RRR), the dependent var...

In reduced rank regression (RRR), the dependent variables are first submitted to a PCA and the scores of the units are then used as dependent variables in a series of

Data project, Choose any published database from the internet or Bethel lib...

Choose any published database from the internet or Bethel library (such as those from the Census Bureau or any financial sites). You may opt to use one of the data files provided b

Angle count method, Angle Count method The method for estimating the pr...

Angle Count method The method for estimating the proportion of the area of a forest which is in fact covered by the bases of trees. An observer goes to each of the number of po

Graphical calculation for mode, For calculating the mode of the grouped dat...

For calculating the mode of the grouped data graphically, the following procedure is adopted. Draw a histogram of the data; the modal class is the tallest rectangle.

Combined standard deviation, How to a calculate the combined standard devia...

How to a calculate the combined standard deviation for five groups (samples)?

Techniques, Q. 1 a) Describe the important quantitative techniques used in ...

Q. 1 a) Describe the important quantitative techniques used in public system management. (10) b) Do you think the day will come when all decisions are made with the assistance of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd