Submit your detailed Jamal has a utility function U = W1/2 , where W is his wealth in millions of dollars

| June 3, 2016

Question
Submit your detailed Jamal has a utility function U = W1/2 , where W is his wealth in millions of dollars (which determines how
much he gets to buy and consume over his lifetime) and U is the utility he obtains. a. Graph Jamal’s utility function.
Is he risk averse? Explain. b. In the final stage of a game show, the host offers Jamal a choice between (A) $4
million for sure, or (B) a gamble that pays $1 million with probability 0.6 and $9 million with probability 0.4.
Should Jamal pick A or B? Explain you reasoning with appropriate calculations. (Hint: The expected value of a
random variable is the weighted average of the possible outcomes, where the probabilities are the weights.)question here…

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