Problem
Consider a risk-averse individual with utility function VW where W denotes wealth, owning a lottery ticket with prizes dependent on the tossing of a fair coin (50% chances to fall on either side) and promising 4 or 64 if head or tail, respectively. Suppose he has no other wealth
(i) What is the minimum price he wl be willing to sell the ticket for?
(ii) Suppose that in addition to owning the first lottery ticket he can now purchase the ticket for another lottery associated to exactly the same coin tossing but promising to pay 30 and -30 if head or tail, respectively Assuming he can borrow the necessary amount at an interest rate of 1, how much he be willing to pay for this ticket?
(iii) Suppose now that he can sold the first ticket for a prices equal or higher than the certainty equivalence. How much will he be willing to pay, if any, for the second ticket?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.