-Assume the Information in the Table Regarding the Probability and

question 40

Multiple Choice

$\begin{array}{|l|l|l|l|l|}\hline \text { Investment } & \text { A } && \text { B } \\\hline \text { State description } & \text { Bad state } & \text { Good state } & \text { Bad state } & \text { Good state } \\\hline \text { Probability } & 0.25 & 0.75 & 0.25 & 0.75 \\\hline \text { Payoff } & 180 & 240 & ? ? & 190 \\\hline\end{array}$
-Assume the information in the table regarding the probability and payoffs of assets A and B relates to an investor who has a log utility function.What does the payoff for asset B need to be in the good state to make the investor indifferent between the two assets?

• A) \( \$ 110.05 \)
• B) \( \$ 365.04 \)
• C) \( \$ 365.40 \)
• D) \( \$ 465.25 \)

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Definitions:

Tobacco

A plant whose leaves are harvested and processed for smoking, chewing, or snuffing, containing the addictive substance nicotine.

Alcohol

A chemical compound, specifically ethanol in the context of beverages, which is consumed and can alter consciousness or behavior.

Fetal Alcohol Spectrum Disorders

The continuum of physical, mental, and behavioral outcomes caused by prenatal exposure to alcohol.

Thalidomide

A drug initially used for morning sickness in the late 1950s and early 1960s, later found to cause birth defects, leading to greater drug regulation and safety measures.