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An Investor Has the Following Utilities Corresponding to Various Possible

Question 28

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An investor has the following utilities corresponding to various possible returns on an investment:
 Profit  Utility $100,0001$75,0000.9$40,0000.6$00.25$5,0000.10$10,0000\begin{array}{|c|l|}\hline \text { Profit } &{\text { Utility }} \\\hline \$ 100,000 & 1 \\\hline \$ 75,000 & 0.9 \\\hline \$ 40,000 & 0.6 \\\hline \$ 0 & 0.25 \\\hline-\$ 5,000 & 0.10 \\\hline-\$ 10,000 & 0 \\\hline\end{array}
-The investor is considering two potential investments with the following potential returns and the probability of these returns.  Investment 1 Investment 2 Profit  Probability  Profit  Probability $75,0000.1$100,0000.2$40,0000.4$75,0000.3$00.5$50000.5\begin{array}{|l|l|r|l|}\hline \text { Investment } 1&&\text { Investment } 2\\\hline \text { Profit } & \text { Probability } &{\text { Profit }} & \text { Probability } \\\hline \$ 75,000 & 0.1 & \$ 100,000 & 0.2 \\\hline \$ 40,000 & 0.4 & \$ 75,000 & 0.3 \\\hline \$ \quad 0 & 0.5 & -\$ \quad 5000 & 0.5 \\\hline\end{array}
Which investment should the investor choose and why?


A) Investment 2 because it has the highest expected monetary value of $40,000.
B) Investment 1 because it has the lowest expected monetary value of $23,500.
C) Investment 2 because it has the highest expected utility of 0.52.
D) Investment 1 because it has the lowest expected utility of 0.455.
E) Cannot be determined without more information.

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