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Question 6 – 8 refer to prospect H and K below ? = ($100, 0.4; $200,...

Question 6 – 8 refer to prospect H and K below

? = ($100, 0.4; $200, 0.6) ? = ($120, ?; $300, 1 − ?)

6. ?V(?) = ?V(?). What value of p makes this statement true?

7. Carol owns prospect H and is interested in selling it. Her utility of wealth function is given by ?(?) = ?^0.5. What is the lowest price for which Carol would be willing to sell prospect H?

8. True or False: The lowest value of K is greater than the lowest value of H, and the highest value of K is greater than the highest value of H, so everyone – regardless of risk preferences – will prefer K to H.

Solutions

Expert Solution

8.false

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