1.Cindy has the option to invest her savings in one of two investment opportunities. The payoffs and the probability associated with payoff for each option is listed below:

Payoff

Probability

(Investment A)

Probability

(Investment B)

$90

0.24

0.125

$60

0.31

0.500

$45

0.45

0.375

a.Find the expected return and standard deviation of each investment.

b.If Cindy has the utility function U = 1.5I, where I denotes the payoff, which investment will she choose?

c.Suppose Cindy's utility function has changed to U = 2I. Which investment will she choose?