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Provide an annual rate of return

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At the beginning of the year Jamie has $100 to invest. He has two options. The safe investment will provide an annual rate of return of 20% for sure. The risky option will provide an annual rate of return of either 0% or 42%, and these two possibilities are equally likely.

Jamie's (expected) utility function over his income at the end of the year is u(w) = sqrt (w)

Without knowing more, how much of his $100 should Jamie invest in each opportunity to maximize his expected utility?

Reference no: EM131160013

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