Risk Scaling: Approximate Expression Consider an exponential decision maker with a risk tolerance equal to $3000 who is offered the following deal [0.25, -5000; 0.5, 1000, 0.25, 5000] a. Calculate his...

Risk Scaling: Approximate Expression

Consider an exponential decision maker with a risk tolerance equal to $3000 who is offered the following deal

[0.25, -5000; 0.5, 1000, 0.25, 5000]

a. Calculate his certain equivalent for the deal using the approximate formula for the certain equivalent. Should the decision maker accept this deal?

b. Calculate the surety of this deal.

c. Using the approximate expression for the certain equivalent calculate the optimal fraction of this deal for this decision maker

d. Calculate the certain equivalent if the decision maker takes only the optimal fraction of the deal. Should the decision maker accepts this deal if he can take the optimal fraction?