Which of the following formulas is used to determine the exponential utility function?
A) Ux) = 1 + e-x/R
B) Ux) = 1× ex/R
C) Ux) = 1/ exR
D) Ux) = 1 - e-x/R

Question

Quizplus · Accepted Answer

The exponential utility function is represented by U(x) = 1 - e^(-x/R), where x is the wealth or outcome and R is the risk tolerance or coefficient of absolute risk aversion. This formula is used in economics and finance to model the utility or satisfaction derived from wealth, incorporating the concept of diminishing marginal utility and risk aversion.

Which of the Following Formulas Is Used to Determine the Exponential