A young couple has $5,000 to invest in either savings bonds or a real estate deal. The expected return on each investment, given good and bad economic conditions, is shown in the following payoff table:

Economic Conditions Investment Good

.6 Bad

.4 Savings bonds $ 1,000 $ 1,000 Real estate 10,000 –2,000 The expected value of investing in savings bonds is $1,000, and the expected value of the real estate investment is $5,200. However, the couple decides to invest in savings bonds. Explain the couple’s decision in terms of the utility they might associate with each investment. LO.1