Professional Documents
Culture Documents
NPM : C1A009055
Jurusan : Ekonomi Pembangunan
Tugas Teori Mikro II
15.4 Consider two lottries, A and B. With loterry A, there is a 0,90 chance that you receive a payoff
of $0 and 0,10 chance that you receive a payoff of $400. With lottery B, there is a 0,50 chance that
you receive a payoff of $30 and 0,50 chance that you receive a payoff of $50.
a) Verify that these two lottries have the same expected value but that lottery A has a bigger
variance than lottery B.
EVA = 0,90($0) + 0,10($400) = 40
EVB = 0,50($30) + 0,50($50) = 15 + 24 = 40
Payoff
Probability
$0
0,9
$400
Square
Deviation
(0 - 400)2 =
160000
2
0,1
Multiplied by Probability
0,90 (160000 ) = 144000
(400 - 400) = 0
0,1 ( 0 ) = 0
Variance
144000
Payoff
Probability
Square
Deviation
Multiplied by Probability
$30
0,5
$50
0,5
(50 - 50) = 0
0,5 ( 0 ) = 0
Variance
200
) + 0,10 (
) + 0,10 (
)
)
EUB = 0,50 (
EUB = 0,50 (
) + 0,50 (
) + 0,50 (
15.6 Suppose that your utility function is U = . Compute the risk premium of the two lotteries
described in Problem 4.
Pu(I1) + (1-p) U(I2) = U(PI1 + (1-P)I2 RP
0,90 ( ) + (0,10) (
)=
1,414 = 40 - RP
RP = 40 1,414 = 38,586
15.5 Sketch the graphs of the following utility functions as I varies over the range $0 to $100. Based
on these averse,risk neutral or risk loving :
Payoff (1) $ 10 Payoff (2) $100
a) U = 10I (1/8)I2
UA = 0,50(10(10) (1/8)102 ) + 0,50(10(100) (1/8)1002 )
UA = 50 12,5 + 500 1250 = -712,5
b) U = (1/8)I2
UB = 0,50 (1/8)102) + 0,50 ((1/8)1002 ) = 0,50(12,5) + 0,50(1250) = 6,25 + 625 = 631,25
c) U = Log (I + 1)
UC = 0,5 (Log (10 + 1)) + 0,5(Log (100 + 1)) = 0,5(1,04) + 0,5(2,004) = 0,52 + 1,002 = 1,522
d) U = 5I
UD = 0,5(5(10) + 0,5 (5(100) = 25 + 250 = 275