Abettor with utility function u(x) = ln(x), where x is total wealth, has a choice between the following two alternatives:
a. win $ 10,000 with probability 0.2
win $1000 with probability 0.8 b
b. win $3000 with probability 0.9
lose $2000 with probability 0.1
1. if the bettor currently has $2500, should he choose a or b?
2. repeat a, assuming the bettor has $5000.
3. repeat a, assuming the bettor has $10,000.
4. do you think that this pattern of choices between a and b is reasonable? why or why not?

Answer

The answer and procedures of the exercise are attached in a microsoft word document.  

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.  

answer: since the question is talking about growth you have to use the growth formula which is inital amount (1 + growth)^time

step-by-step explanation:

the intial amount is 1200, the growth is 4.8, and the time is 7. plug those numbers into the equation, also i think you have to change 4.8 into a percent. but, i have forgotton how to do that. if this is a online class go on to the lesson.

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step-by-step explanation: