Utility index , Applied Statistics

If the economy does well, the investor's wealth is 2 and if the economy does poorly the investor's wealth is 1. Both outcomes are equally likely. The investor is offered to invest in shares of a project that gains 3=2 if the economy does well and loses 1 if the economy does poorly. Therefore, if the investor obtains α shares of this project his wealth is 2 + 3α/2

with probability 1/2 and 1= α with probability 1/2. The investor is an expected utility maximizer with utility index u(z) = ln z. What is the optimal α for this investor? ( α must be between 0 and 1).

Posted Date: 3/9/2013 12:27:12 AM | Location : United States







Related Discussions:- Utility index , Assignment Help, Ask Question on Utility index , Get Answer, Expert's Help, Utility index Discussions

Write discussion on Utility index
Your posts are moderated
Related Questions
(a) The Horton's initial infiltration capacity for a catchment is 204 mm/h and the constant infiltration value at saturation is 60 mm/h. For a rainfall in excess of 204 mm/h mainta

Empirical Mode Where mode is ill-defined, its value may be ascertained by the following formula based upon the empirical relationship between Mean, Median and Mode: Mode = 3


Examine properties of good average with reference to AM, GM, HM, MEAN MEDIAN MODE

A.The coupon rate of Erie-Chicago Rail is 7%. The interest rate of Florida municipal bond with equal risk is 6%.  At what tax rate the two bonds are as good as each other B.Supp

(a) Elevation (m) 0 400 800 1200 1600 2000 2400 2800 3200 4000 480

You are going to purchase a part from a specialty vendor.  Your company needs a C p of at least 1.67 on a critical dimension of the part.  The dimensional specification for this p

Scenario: To fundraise for middle school camp the year 3 and 4 syndicate designed and produced chocolate treats to sell to the year 1 and 2, and year 5 and 6 students at morning te

Melissa Bakery is preparing for the coming thanksgiving festival. The bakery plans to bake and sell its favourite cookies; butter cookies, chocolate cookies and almond cookies. A k

You are attempting to purchase a part from a specialty vendor. Your company requires a C p of at least 1.67 on a critical dimension of the part. The dimensional specific