To Maximize Her Expected Utility, Which One of the Following

question 19

Multiple Choice

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

• 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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