### Clancy buys a coupon to pays when sullivan

##### Reference no: EM1319056

Q. Clancy has \$1,200 also is an expected utility maximize with utility over wealth u (w) = ln(w), where ln(w) is the natural log of his wealth. He plans to bet on a boxing match among Sullivan also Flanagan. For \$4, he can buy a coupon to pays \$10 if Sullivan wins also nothing otherwise. For \$6 he can buy a coupon to will pay \$10 if Flanagan wins also nothing otherwise. Clancy doesn't agree with these odds. He thinks to the together each have a probability of 1/2 of winning.

(a) Illustrate what is Clancy's attitude towards risk? To is, is he risk loving, risk averse of risk neutral?

(b) If Clancy buys a coupon to pays when Sullivan wins Illustrate what is the induced lottery to he faces? Illustrate what is its expected value?

(c) Illustrate what if Clancy buys a coupon to pays when Flanagan wins?

(d) Will he be willing to buy both coupons?

(e) State his maximization problems also solve it.

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