he following table showsthe relationship between your wealth and your utility.

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the following table showsthe relationship between your wealth and your utility.

Wealth
Utility
11.0
10
15.0
15
19.0
20
22.0
25
25.0
30
27.0
35
29.0
You can invest in asset A, which offers a riskless payoff of $20,000 or in asset B, which
pays $15,000 with 40% probability and $25,000 with 60% probability. Which
investment do you choose?
O A A, because its utility is greater than the expected utility of B. which is 21.4.
O B. I am indifferent between A and B because I am risk neutral.
O C. B, because its expected utility of 22.6 is greater than the utility of A.
O D. B, because its expected utility of 23.4 is greater than the utility of A.
nsure
Transcribed Image Text:Wealth Utility 11.0 10 15.0 15 19.0 20 22.0 25 25.0 30 27.0 35 29.0 You can invest in asset A, which offers a riskless payoff of $20,000 or in asset B, which pays $15,000 with 40% probability and $25,000 with 60% probability. Which investment do you choose? O A A, because its utility is greater than the expected utility of B. which is 21.4. O B. I am indifferent between A and B because I am risk neutral. O C. B, because its expected utility of 22.6 is greater than the utility of A. O D. B, because its expected utility of 23.4 is greater than the utility of A. nsure
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