If you are exposed to a 5050 chance of gaining or losing, Financial Management

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If you are exposed to a 5050 chance of gaining or losing

If you are exposed to a 50/50 chance of gaining or losing $1000 and insurance that removes the risk costs $500, at what level of wealth will you be indifferent relative to taking the gamble or paying the insurance?

That is, what is your certainty equivalent wealth? Assume your utility function is U(W) = -

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Financial Management: If you are exposed to a 5050 chance of gaining or losing

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Financial Management: If you are exposed to a 5050 chance of gaining or losing

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