As in the previous exercise consider an initial wealth of, Business Economics

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As in the previous exercise consider an initial wealth of

As in the previous exercise, consider an initial wealth of 10 and the lottery X˜ . Assume now that the utility is: u = w for w <= 10, 1/2 w + 5 for w >= 10.

(a) Draw the utility function. Is it globally concave?

(b) Compute the certainty equivalent and the risk premium attached to X˜ .

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