=+4. This case draws on the analysis in Appendix 8-A. An investor is consid-

ering two $100,000 investments: (1) ABC Company bonds maturing in one year and paying 12 percent interest at maturity and (2) U.S.

Treasury Notes also maturing in one year and paying seven percent interest at maturity. The investor believes there is a . 10 probability that ABC Company will default. If default were to occur, it is estimated that the investor would receive 80 cents on the dollar.

Required:

a.

Determine the expected utility of each investment.