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:

Evidence

Information or data presented in support of an assertion, argument, or as a basis for belief.

Loaded Questions

A type of question that contains a controversial or unjustified assumption, often used to trap the respondent into agreeing with the premise.

Begging the Question

A logical fallacy where the conclusion of an argument is assumed in one of the premises, essentially arguing in a circle without proving the initial point.

Equivocation

The misleading use of a term with more than one meaning or sense.