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Solve following questions. ?= √?.M is your house value. If there is a flood, your house...

Solve following questions. ?= √?.M is your house value. If there is a flood, your house value is 64. If there is no flood, your house value is 100. (a) What is expected income? (b) What is expected utility? (c) What is utility of expected income? (d) Calculate ‘certainty equivalent’ and ‘risk premium’. (e) Draw the given situation with two graphs you learned in the lecture.

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