$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$\text { Investiment } A$ $ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$\text { Investment } B$
$\begin{array}{|l|l|l|l|l|}
\hline & \text { Good year } & \text { Bad year } & \text { Good year } & \text { Bad year } \
\hline \text { Probability } & 0.80 & 0.2 & 0.90 & 0.1 \
\hline \text { Pay-off } & 140 & 45 & 110 & 70 \
\hline
\end{array}$
-Under a concave quadratic utility preference function with a constant term of 0.0001,a wealth level of 100 will have a utility of:

Question

$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$\text { Investiment } A$   $  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$\text { Investment } B$
$\begin{array}{|l|l|l|l|l|}
\hline & \text { Good year } & \text { Bad year } & \text { Good year } & \text { Bad year } \
\hline \text { Probability } & 0.80 & 0.2 & 0.90 & 0.1 \
\hline \text { Pay-off } & 140 & 45 & 110 & 70 \
\hline
\end{array}$
-Under a concave quadratic utility preference function with a constant term of 0.0001,a wealth level of 100 will have a utility of:

Quizplus · Accepted Answer

Using equation 7.3,we can compute the utility as 100 - 0.0001(100)² = 99.

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