If clancy buys a coupon to pays when sullivan wins, Ask an Expert

Economics

Q. Clancy has $1,200 also is an expected utility maximize with utility over wealth u (w) = ln(w), where ln(w) is the natural log of his wealth. He plans to bet on a boxing match among Sullivan also Flanagan. For $4, he can buy a coupon to pays $10 if Sullivan wins also nothing otherwise. For $6 he can buy a coupon to will pay $10 if Flanagan wins also nothing otherwise. Clancy doesn't agree with these odds. He thinks to the together each have a probability of 1/2 of winning.

(a) Illustrate what is Clancy's attitude towards risk? To is, is he risk loving, risk averse of risk neutral?

(b) If Clancy buys a coupon to pays when Sullivan wins Illustrate what is the induced lottery to he faces? Illustrate what is its expected value?

(d) Will he be willing to buy both coupons?

(e) State his maximization problems also solve it.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9169433

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