If Ann's Utility Function Is U = W⁰

question 71

Multiple Choice

If Ann's utility function is U = W⁰.⁵,and she invests in a business which can yield $6,400 with probability 1/5,and $3600 with probability 4/5,then her risk premium to avoid bearing this risk is

• A) $36.
• B) $41.6.
• C) $64.
• D) $100.

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