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

Uncertain demand, Consider a Cournot duopoly with two firms (fi rm 1 and f...

Consider a Cournot duopoly with two firms (fi rm 1 and fi rm 2) operating in a market with linear inverse Demand P(Q) = x Q where Q is the sum of the quantities produced by both

Corelation regrassion, the two regrassion line will pass through the point ...

the two regrassion line will pass through the point (x,y)

Z-score of a student, A study was designed to investigate the effects of tw...

A study was designed to investigate the effects of two variables - (1) a student's level of mathematical anxiety and (2) teaching method - on a student's achievement in a mathemati

Multivariate analysis of variance, Multivariate analysis of variance (MANOV...

Multivariate analysis of variance (MANOVA) is a technique to assess group differences across multiple metric dependent variables simultaneously, based on a set of categorical (non-

Simulation - analytical approach, Analytical Approach We will illustra...

Analytical Approach We will illustrate this through an example. Example 1 A firm sells a product in a market with a few competitors. The average price charged by the

Statistical process control, Statistical Process Control The variabilit...

Statistical Process Control The variability present in manufacturing process can either be eliminated completely or minimized to the extent possible. Eliminating the variabilit

Stratified sampling, Stratified Sampling Stratified Sampling is ...

Stratified Sampling Stratified Sampling is generally used when the population is heterogeneous. In this case, the population is first subdivided into several parts (or s

What is the probability that they all hit the target, QUESTION ONE. (a) ...

QUESTION ONE. (a) The probability that, a bomber hits a target on a bombing mission is 0.70 Three bombers are sent to bomb a particular target. (i) What is the probability

Risk of portfolios, Risk of Portfolios So far, we have seen the applic...

Risk of Portfolios So far, we have seen the application of standard deviation in the context of risk in single investment. But usually most investors hold portfolios of securi

Measures of dispersion, calculate variance and standard deviation of the f...

calculate variance and standard deviation of the following sample 12,22,32,13,12,23,34,52,56,23,44,32,11,11

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