Exhibit 14.7
The following questions use the information below.
A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45.
-What is the formula for the exponential utility function U(x) ?

Question

Exhibit 14.7
The following questions use the information below.
A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45. Exhibit 14.7 The following questions use the information below. A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45. -What is the formula for the exponential utility function U(x) ? A) −e−x/R B) 1 + e−x/R C) 1 − ex/R D) 1 − e−x/R

-What is the formula for the exponential utility function U(x) ?

Quizplus · Accepted Answer

The exponential utility function is commonly represented as U(x) = 1 - e^(-ax), where 'a' is a coefficient reflecting risk aversion. The given formula in option D closely resembles this structure, albeit with more specific financial variables incorporated.

Exhibit 14.7 The Following Questions Use the Information Below