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
Correct Answer:
Verified
Correct Answer:
Verified
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