11. Maxine wants to choose a portfolio of assets to maximize her expected utility. Her utility function is u = Her five choices are as follows: In one year portfolio A will be worth 49 with probability .6 or 64 with probability .4; portfolio B will be worth 36 with probability .6 or 81 with probability .4; portfolio C will be worth 25 with probability .6 or 100 with probability .4; portfolio D will be worth 16 with probability .5 or 121 with probability .5; portfolio E will be worth 4 with probability .5 or 144 with probability .5. Her most preferred portfolio is :w, where w denotes her wealth in one year.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Answers: a)A b)B c)C d)D e)E
11. Maxine wants to choose a portfolio of assets to maximize her expected utility.
Her utility function is u =
Her five choices are as follows: In one year portfolio A will be worth 49 with
probability .6 or 64 with probability .4; portfolio B will be worth 36 with
probability .6 or 81 with probability .4; portfolio C will be worth 25 with
probability .6 or 100 with probability .4; portfolio D will be worth 16 with
probability .5 or 121 with probability .5; portfolio E will be worth 4 with
probability .5 or 144 with probability .5. Her most preferred portfolio is
Vw, where w denotes her wealth in one year.
Transcribed Image Text:11. Maxine wants to choose a portfolio of assets to maximize her expected utility. Her utility function is u = Her five choices are as follows: In one year portfolio A will be worth 49 with probability .6 or 64 with probability .4; portfolio B will be worth 36 with probability .6 or 81 with probability .4; portfolio C will be worth 25 with probability .6 or 100 with probability .4; portfolio D will be worth 16 with probability .5 or 121 with probability .5; portfolio E will be worth 4 with probability .5 or 144 with probability .5. Her most preferred portfolio is Vw, where w denotes her wealth in one year.
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