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Suppose there are 125 risk averse individuals, each with a $1 to invest in a project at t = 0.The project will yield $1 if liquidated at t = 1 and $2.20 if liquidated at t = 2.At t = 0, no individual knows what his type will be at t = 1.If he turns out to be type D, his utility taction for consumption will be while if he turns out to be type L, his utility for consumption will be .It is known at t = 0 that 40% of the individuals will type D and 60% type L at t = 1.
-Given the scenario in questions 36 and 37, your expected payoff from withdrawing at t=1 if you are a type L depositor is

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Suppose there are 125 risk averse individuals, each with a $1 to invest in a project at t = 0.The project will yield $1 if liquidated at t = 1 and $2.20 if liquidated at t = 2.At t = 0, no individual knows what his type will be at t = 1.If he turns out to be type D, his utility taction for consumption will be while if he turns out to be type L, his utility for consumption will be .It is known at t = 0 that 40% of the individuals will type D and 60% type L at t = 1.
-Given the scenario in questions 36 and 37, your expected payoff from withdrawing at t=1 if you are a type L depositor is

Quizplus · Accepted Answer

Since the project yields $1 if liquidated at t = 1 and $2.20 at t = 2, the expected payoff from withdrawing at t=1 if you are a type L depositor is $1. Therefore, the answer is C) $1.0.

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