Business
Business, 28.02.2021 16:50, lovelyheart5337

You have just been chosen to appear on Hoosier Millionaire! The rules are as follows: There are three hidden cards. One says "STOP" and the other two have dollar amounts of $2, and $10. You get to choose a card. If the card says "STOP", you win no money. At any time you may quit and keep the largest amount of money that has appeared on any card you have chosen, or continue. If you continue and choose the stop card, however, you win no money. a. Suppose your utility is U(x) = x^1/3 = 3âx what is the strategy that you can maximize your expected utility?
b. Consider the generalized utility function of the form x^θ where θ is your risk averseness parameter. Show that if your preference of risk averseness is θ >= 0.43, then you would play the game until you draw $10 or stop card; whereas if θ < 0.43 you would be more conservative and play only one round.
c. Find your expected utility for both of the cases θ >= 0.43 and θ =< 0.43. Notice that your expected utility (EMV with utility function) will now be a function of θ.

answer
Answers: 2

Other questions on the subject: Business

image
Business, 22.06.2019 07:30, dimondqueen511
Which two of the following are benefits of consumer programs
Answers: 1
image
Business, 22.06.2019 21:50, edgarsandoval60
By which distribution system is more than 90 percent of u. s. coal shipped? a. pipelinesb. trucksc. waterwaysd. railroadse. none of the above
Answers: 1
image
Business, 23.06.2019 00:00, JayceMeyers06
The undress company produces a dress that women use to quickly and easily change in public. the company is just over a year old and has been successful through a kickstarter campaign. the undress company has identified a customer segment, but if it wants to reach a larger customer segment market outside of the kickstarter family, what question must it answer?
Answers: 1
image
Business, 23.06.2019 06:30, janeou17xn
Afinance company wants to upgrade its accounting software to a higher version. this version change requires a change in data formats. which method represents a change in data formats?
Answers: 1
Do you know the correct answer?
You have just been chosen to appear on Hoosier Millionaire! The rules are as follows: There are thre...

Questions in other subjects:

Konu
Mathematics, 13.11.2020 01:00
Konu
Mathematics, 13.11.2020 01:00
Konu
Chemistry, 13.11.2020 01:00