An investor has the following utilities corresponding to various possible returns on an investment:
-The investor is considering two potential investments with the following potential returns and the probability of these returns.
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.
Correct Answer:
Verified
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