Natasha is going to buy a risky asset that has an expected value of $62, which yields an expected utility of 146. Equivalently, she could get utility of 146 from a certainty equivalent of $43. What is Natasha's risk premium?
A)$19
B)$43
C)$103
D)$105

Question

Quizplus · Accepted Answer

The risk premium is the difference between the expected value of the risky asset ($62) and the certainty equivalent ($43), which equals $19.

Natasha Is Going to Buy a Risky Asset That Has