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Author Question: For the utility function U = Wa, what values of a correspond to being risk averse, risk neutral, and ... (Read 161 times)

ts19998

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For the utility function U = Wa, what values of a correspond to being risk averse, risk neutral, and risk loving?
 
  What will be an ideal response?

Question 2

Johnny owns a house that would cost 100,000 to replace should it ever be destroyed by fire. There is a 0.1 chance that the house could be destroyed during the course of a year. Johnny's utility function is U = W0.5. How much would fair insurance cost that completely replaces the house if destroyed by fire? Assuming that Johnny has no other wealth, how much would Johnny be willing to pay for such an insurance policy? Why the difference?
 
  What will be an ideal response?


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kkenney

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Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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