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 Post subject: Utility Theory - Wealth problem
PostPosted: Sat, 16 Jun 2012 11:40:56 UTC 
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Hi everyone,

Can someone please help me with this? I have the following problem to solve:

Consider a $50 investment you are planning to make, which is guaranteed to give you a $50 profit. The utility function you will use is f(x) = x - sqrt x
What is the expected increase in your utility value if you already have:

i: $50 only
ii: $10,000
iii: $1,000,000

Please help me!!
Thank you in advance


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 Post subject: Re: Utility Theory - Wealth problem
PostPosted: Sat, 16 Jun 2012 19:42:24 UTC 
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Joined: Wed, 30 Mar 2005 04:25:14 UTC
Posts: 12103
Location: Austin, TX
hhon1012 wrote:
Hi everyone,

Can someone please help me with this? I have the following problem to solve:

Consider a $50 investment you are planning to make, which is guaranteed to give you a $50 profit. The utility function you will use is f(x) = x - sqrt x
What is the expected increase in your utility value if you already have:

i: $50 only
ii: $10,000
iii: $1,000,000

Please help me!!
Thank you in advance


Do you know what utility means? It should be a simple matter of accounting for the initial $50 and then plugging the rest into the function.

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