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

Determine best estimates of the population mean and variance, Question: ...

Question: (a) A normal distribution is thought to have a mean of 50. A random sample of 100 gave a mean of 52.6 and a standard deviation of 14.5. A significance test was carri

Regression analysis , The data used is from a statistical software Minitab;...

The data used is from a statistical software Minitab; London.MPJ is the file that consists of 1519 households drawn from 1980 - 1982 British Family Expenditure Surveys. Data that i

Sample, types of sampling method

types of sampling method

Statistical errors, Statistical Errors              Statistical data ar...

Statistical Errors              Statistical data are obtained either by measurement or by observation. Hence to think of perfect accuracy is only a delusion or a myth, It is no

Standard deviation and variance, Explanation of standard deviation and vari...

Explanation of standard deviation and variance Describe the importance of standard deviation and variance, what they calculate and why they are required. Importance of char

Frailty in multi state models, how can i use continuous frailty in multi st...

how can i use continuous frailty in multi state models?

Find a nash equilibrium, 2 bidders have identical valuations of an object f...

2 bidders have identical valuations of an object for sale. The value of the object is either 0; 50 or 100, with equal probabilities. The object is allocated to one of the bidders i

Age at first marrage, get a questionnaire that captured age at first marria...

get a questionnaire that captured age at first marriage

Accelerated failure time model, Accelerated Failure Time Model A basic m...

Accelerated Failure Time Model A basic model for the data comprising of survival times, in which the explanatory variables measured on an individual are supposed to act multipli

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