What is the formula for the exponential utility function Ux)? A)_−e−x/R B)1 + e^−x/R C)1 − e^x/R D)1 − e^−x/R

Question

Quizplus · Accepted Answer

The exponential utility function is typically represented by the formula U(x) = 1 - e^(-ax), where a is a constant that reflects the individual's level of risk aversion. However, the options provided in the question are variations of this formula with additional parameters. Among the given choices, option D (1 - e^(-s1*U1*(P1 - x)/(R*s1*P0))) is the closest to the standard formula for exponential utility. Therefore, D is the best choice for the formula of the exponential utility function.

What Is the Formula for the Exponential Utility Function Ux)