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Suppose that there are only two possible future states of the world, and the utility function is !ogarithmic.20 Let the probability of state 1, 7r I, equal ~, and the prices of the pure securities, PI and P2, equal $0.60 and $0.40, respectively.An individual has an initial wealth or endowment, Wo, of $50, 000 . What amounts will the risk - averse individual invest in pure securities 1 and 2 ?
Sagot :
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