Consider an investor who must decide how much of her initial wealth W to put into a risky asset. the risky asset can have any of positive or negative rates to return ri with probability pi, i=1,...,n. if b is the amount of wealth to be put into the risky asset, final wealth under outcome i will be (w-beta) +(1+ri)b = w+bri. the investor's problem is to choose b to maximize the expected utility of wealth.(a) write down the investor's maximization problem. (b) determine under what conditions a risk-averse investor will decide to put no wealth into the risky asset . (c) what happens to the amount of wealth devoted to the risky asset as wealth increase?

5. Consider an investor who must decide how much of her initial wealth w to put into a risky asset. The risky asset can have any of positive or negative rates of return ri with probability pi , i = l, , 11. If B is the amount of wealth to be put into the risky asset, nal wealth under outcome i will be (w - B) + (1 + ri )B = w + Bri . The investor's problem is to choose B to maximize the expected utility of wealth. (a) Write down the investor's maximization problem. (b) Determine under what conditions a risk-averse investor will decide to put no wealth into the risky asset. (c) What happens to the amount of wealth devoted to the risky asset as wealth increase