Assume an Investor with the Following Utility Function: U =

question 51

Multiple Choice

Assume an investor with the following utility function: U = E(r) - 3/2(s²) . To maximize her expected utility, which one of the following investment alternatives would she choose

• A)A portfolio that pays 10% with a 60% probability or 5% with 40% probability.
• B)A portfolio that pays 10% with 40% probability or 5% with a 60% probability.
• C)A portfolio that pays 12% with 60% probability or 5% with 40% probability.
• D)A portfolio that pays 12% with 40% probability or 5% with 60% probability.

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Definitions:

Safe Sex

Sexual activities that are practiced to reduce the risk of transmitting or acquiring sexually transmitted infections and reducing unwanted pregnancies.

High School

An educational institution for teenagers that serves as the secondary level of schooling, typically including grades 9 through 12.

Pregnancy

A biological condition where a woman carries and develops one or more offspring inside her womb.

Protective Factors

Events or circumstances that help to offset, or buffer, risk factors. Anything that lessens the likelihood of disease. For example, exercise is thought to be a protective factor for cardiovascular disease.