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16.2. Consider the distributions shown in Figure 16.27. Assume that the distributions in each figure represent payoffs associated with two mutually exclusive projects. The expected
16.2. Consider the distributions shown in Figure 16.27. Assume that the distributions in each figure represent payoffs associated with two mutually exclusive projects. The expected monetary values of the projects are as follows: \{E (a) (u) 3 (a) Consider Figure 16.27(a). Suppose that an individual is risk-neutral. Which project A or B would he/she prefer? Which project would an individual prefer if he/she is risk-averse? Which project would be preferred by a risk-seeking individual? (b) Answer the same question as in part (a) for projects C and D depicted in Figure 16.27(b). (c) Can you tell which of the projects, E and F, in Figure 16.27 (c) would be preferred by a risk-averse individual? Why or why not
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