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A person has an intial wealth of W = £144 (W denotes Wealth) and the following utility...

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skema | eNotes Newbie

Posted May 17, 2013 at 11:23 AM via web

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A person has an intial wealth of W = £144 (W denotes Wealth) and the following utility function, U(W) = W 0.5. There is the opportunity to make an investment that will yield a return of £42 or make a loss of £42, which with a probability of 1/2. By calculating this persons expected utility when the investment is made and when it is not made, determine whether this person should make the investment. 

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