Consider a risky project x that has the following payoff and probability distribution table:

Payoff	$1	$4	$16
Probability	0.5	0.2	0.3

a.

Suppose an investor, Mrs. Donna Nash, has a utility function given by the function

gx= 0.4*x2 +20

Compute CE, the certainty equivalence, of x for our investor.

Is Mrs. Nash risk-neutral, risk-averse, or risk-loving? Explain

c.

Suppose another investor, Mr. John Nash, has a utility function given by the function

fx=25+10x

Compute CE, the certainty equivalence, of x for our investor.

Is Mr. Nash risk-neutral, risk-averse, or risk-loving? Explain

d.

Suppose their son, Joe Nash, has a utility function given by the function

fx=20*x-20

Compute CE, the certainty equivalence, of x for our investor. (3 marks)

Is Joe Nash risk-neutral, risk-averse, or risk-loving? Explain (1.0 mark)