Question

Natasha is going to buy a risky asset that has an expected value of​ $62, which yields an expected utility of 146.​ Equivalently, she could get utility of 146 from a certainty equivalent of​ $43. What is​ Natasha's risk​ premium? A. ​$105 B. ​$19 C. ​$43 D. ​$103

Answer 1

Answer:

The correct answer to the following question is option B) $19 .

Explanation:

Given information -

A risky asset with expected value of $62, yields an expected utility of 146

An asset which has certainty equivalent equal to $43 and yields an expected utility of 146,

so one has to find the risk premium of Natasha , then it would be -

Asset with expected value - Asset with certainty equivalent

= $62 - $43

= $19 .