-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) \( \$ 465.25 \)

---

Definitions:

High Initial Financing

The large amount of capital required at the start of a venture or project to cover costs before generating revenue.