C-3PO, a rational but a quite worried and also risk averse droid, is considering investing in a few financial assets. There are two possible future states of the world, each equally likely: either the Empire wins or the Rebel alliance wins. The financial assets have the same purchase cost and have the following payoffs (costs have been deducted from the payoffs below) in either state of the world:

Asset (one share in firm) Payoff Empire wins Payoff Rebels win

White armour polish inc 10 SEK 2 SEK

Rebel music enterprises 2 SEK 10 SEK

Galactic tea company 4 SEK 4 SEK

a) What is the expected monetary value and what is the variance of the payoffs of each asset?

b) C-3PO can buy 4 assets in total. What will he buy? Explain!

c) C-3PO is then reprogrammed so he becomes completely risk neutral. Will his choice of 4 assets change? Explain why/why not