Charlie Consumes Apples and Bananas $\mathbf{U}\left(X_{A}, X_{B}\right)=x_{A} x^{2} B$

question 20

Multiple Choice

Charlie consumes apples and bananas. His utility function is $\mathbf{U}\left(X_{A}, X_{B}\right) =x_{A} x^{2} B$
-refer to scenario above, Charlie's utility function is x_Ax_B.The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40.If the price of apples increased to $4 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by

• A)15 apples.
• B)3 apples.
• C)7.50 apples.
• D)12.50 apples.
• E)None of the above.

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Definitions:

Equally-Weighted Portfolio

An investment portfolio where each asset is allocated the same percentage of total investment capital.

Securities

Financial instruments that hold some type of monetary value, such as stocks, bonds, or options.

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Investment portfolios constructed to capture risk factors or sources of returns that are believed to explain the performance of securities.

Expected Return

The weighted average of all possible returns for a given investment, with weights being the probabilities of each outcome.