If the payoff is $2200 and R is equal to $500, what is the utility function?
A) 0.9877
B) 0.6819
C) 0.7645
D) 0.4502

Name: If the payoff is $2200 and R is equal to $500, what is the utility function? A) 0.9877 B) 0.6819 C) 0.7645 D) 0.4502
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Question

Quizplus · Accepted Answer

The utility function can be calculated using the formula U = 1 - e^(-R/P), where U is the utility, R is the risk, and P is the payoff. Substituting R = $500 and P = $2200 into the formula gives U = 1 - e^(-500/2200) = 0.9877.

If the Payoff Is $2200 and R Is Equal to $500