Vanessa has a utility function for income given by U(I) = VI%3D(that is the square root of income). Because of the nature of herutility function, we know that Vanessa is risk averse. Vanessa isconsidering an investment that would give her an income of$10,000 with a probability of 0.5 or an income of $15,000 with aprobability of 0.5. The expected utility of this investment is(rounded to 2 decimal places):O A. 111.24O B. 113.48.O C. 118.35.O D. 125.00.

It is given that the utility function for income is U(I)=square root(I).

Answered: Vanessa has a utility function for…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Suppose that a decision maker's risk atitude toward monetary gains or losses x given by the utility function(x) = (50,000+x) 34/2. Suppose that a decision maker has the choice of buying a lottery ticket for $5, or not. Suppose that the lottery winning is $1,000,000, and the chance of winning is one in a thousand. Then..... O The decision maker should not buy the ticket, as the utility from not buying is 223.6, and the expected utility from buying is 223.59. The decision maker should not buy the ticket, as the utility from not buying is 223.6067, and the expected utility from buyingis 223.6065. O The decision maker should buy the ticket, as the utility from not buying 223.60, and the utility from buying is 224.4. The decision maker should buy the ticket, as the utility from not buying 223.6065, and the utility from buying is 223.6067.
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