The relationship between income and total utility (TU) for 2 investors (Alan and Bob) is as follows: Alan Bob Income TU Income TU 5,000 14 5,000 6 10,000 24 10,000 14 15,000 32 15,000 24 20,000 38 20,000 36 25,000 43 25,000 52 30,000 47 30,000 72 35,000 49 35,000 100 Each investor has been confronted with the following three investment opportunities. The first opportunity is an investment which pays €15,000 risk free. Opportunity two offers a 0.4 probability of a €25,000 payment and a 0.6 probability of a payment of €10,000. The final investment will either pay €35,000 with a probability of 0.25 or €5,000 with a probability of 0.75. The expected value of opportunity two is €10,000 €6,000 €16,000 €25,000
- The relationship between income and total utility (TU) for 2 investors (Alan and Bob) is as follows:
Alan Bob
Income TU Income TU
5,000 14 5,000 6
10,000 24 10,000 14
15,000 32 15,000 24
20,000 38 20,000 36
25,000 43 25,000 52
30,000 47 30,000 72
35,000 49 35,000 100
Each investor has been confronted with the following three investment opportunities. The first opportunity is an investment which pays €15,000 risk free. Opportunity two offers a 0.4
The
- €10,000
- €6,000
- €16,000
- €25,000
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