Home Homework Help Textbooks Test Prep Textbook Answers

Homework Help

Math
Advanced Math
desperately needs help with questions...

Question: desperately needs help with questions...

Question details

Desperately needs help with questions

There are two assets, X and Y. Both are risky, and pay out only in the range , 0, 1. The agent has 1 unit of income and must exhaust his income on these two assets: he cannot hold cash. The price of both assets is 1. The joint distribution of the payoff of the two assets has the form: -1 0 A. Assu me po q.-0. Assume pi-ph-: p and q,-q,-: q. Assume q > p. Let α denote the optimal share of income put into asset X. Assume the price of each asset is 1 and total income is 1. Write out the first order conditions for the case when both assets are purchased. Using utility function u(m) e-m, find conditions in which σα/O is increasing. B. The conditions are the same as in (A), except now we analyze the case when only one asset is consumed. Under which conditions is X, and only X, purchased?

Solution by an expert tutor

Blurred Solution

This question has been solved

Subscribe to see this solution