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 Post subject: Utility Theory - Wealth problemPosted: Sat, 16 Jun 2012 11:40:56 UTC
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Joined: Sat, 16 Jun 2012 11:30:41 UTC
Posts: 1
Hi everyone,

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

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 Post subject: Re: Utility Theory - Wealth problemPosted: 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,

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

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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