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.An investor faces two investment alternatives for the coming year. Her first alternative is to buy Treasury bonds, which will give her a wealth of
.An investor faces two investment alternatives for the coming year. Her first alternative is to buy Treasury bonds, which will give her a wealth of 10M (M for one million of dollars) for sure at the end of next year. The second alternative has three possible outcomes: 20M, 10M and 5M with corresponding probabilities of 20%, 40%, 40%. She decides to use the utility function (b) in the previous question to evaluate these alternatives (where x is in one million of dollars). Which is preferred? Give your reason.
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