Statistics> Questions and Answers > Atkinson Co. is planning to buy a machine and assigned the job to Rick - SOLVED
Atkinson Co. is planning to buy a machine and assigned the job to Rick - SOLVED
Atkinson Co. is planning to buy a machine and assigned the job to Rick. Rick is risk-neutral with respect to each attribute and he has the following values/utilities for life span, price, power, brand and operating weight ... [Show More]Last updated: 2 years ago
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SOLVED: Assessed risk tolerance of Cathy is $8700. Assume that her preferences can be modeled with the exponential utility function U(x) = 2.5700 – 1.8200e–x/R
Assessed risk tolerance of Cathy is $8700. Assume that her preferences can be modeled with the exponential utility function U(x) = 2.5700 – 1.8200e–x/R Suppose that she faces the following gamble: Win $3213.03 with probability 0.30, Lose $1269.79 with probability 0.15, Win $1887.74 with probability 0.20, Win nothing with probability 0.15, and Lose $811.79 with probability 0.20. 1) What is the expected utility of the gamble? a. 0.7986 b. 0.9111 c. 0.6842 d. 1.3000 e. 0.5000
