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## X and Y, assume you agreed to give y… Show more You and yo

Paper help Economics X and Y, assume you agreed to give y… Show more You and yo

# X and Y, assume you agreed to give y… Show more You and yo

X and Y, assume you agreed to give y… Show more You and your friend are watching a Baseball game, the teams are X and Y, assume you agreed to give your friend \$ 44 if his/her team %u201CY%u201D wins, also he/she agreed to give you \$ 44 if your team %u201C X%u201D wins, probability of team X wins = probability of team Y wins = 0.5, and your initial is W=\$ 100. Answer the following: 1. If U(W) = (W) ^ 1/2 , what is your utility if team X wins, if team Y wins, and what is the expected utility of wealth EU(W)? 2. What is the expected wealth E(W), and what is the utility if expected wealth U(E(W))? 3. Compare EU(W) with U(E(W)? 4. Find the absolute and relative risk aversion measure r(w), and explain the risk aversion %u201C i.e. risk averse, risk lover, or risk neutral%u201D? 5. Draw a diagram, and show the utility, expected utility, wealth, and expected wealth? 6. Repeat the steps 1 to 5 if U(W) = (W) ^ 1/2 and U(W) = W? • Show less

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