Mathematics · Decision Theory and Risk
A consumer faces two outcomes: ₹100 with probability 0.6 and ₹36 with probability 0.4. Her utility function is u(W) = √W. Calculate: (i) Expected income E(W), (ii) Expected utility E[u(W)], (iii) Certainty equivalent (CE), and (iv) Risk premium (RP). Which option is fully correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1E(W) = 74.4; E[u(W)] = 7.8; CE = 60.84; RP = 13.56✓
- 2E(W) = 68; E[u(W)] = 7.8; CE = 60.84; RP = 7.16
- 3E(W) = 74.4; E[u(W)] = 8.4; CE = 64; RP = 10.4
- 4E(W) = 74.4; E[u(W)] = 8.4; CE = 70.56; RP = 3.84
Correct answer
E(W) = 74.4; E[u(W)] = 7.8; CE = 60.84; RP = 13.56
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for Mathematics?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Decision Theory and Risk MCQs →Want more practice questions on Decision Theory and Risk?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in Mathematics · Decision Theory and Risk