Assume That the Utility Function of an Individual Is Represented

question 59

Multiple Choice

Assume that the utility function of an individual is represented as U =√W - 0.001W; where W (his present wealth) = $250,000.He considers investing in a gamble which would double his wealth if he wins but still leave him with $250,000 if he loses.Given that his probability of winning is 0.6, calculate his expected utility of taking the bet.

• A)157 units
• B)250 units
• C)207.11 units
• D)224.3 units

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