Final Exam - Friday, 12th August 2022, 9:30 - 11:45am (Sydney Time) Time left 1:00:03 3 Question [15 Marks]: aved It of Jessica, the CIO (Chief Investment Officer) of an infrastructure investment fund, is contemplating two alternative uncertain infrastructure investment projects. Their distributions for payoffs are as follows. Probabilities Payoff Project Alpha Project Beta $60,000,000 130% 25% $90,000,000 140% 50% $120,000,000 30% 25% a) Assume that Jessica's preference function can be estimated by an exponential utility function (R = 80,000,000). Calculate the EU for both Project Alpha and Project Beta. Which project should Jessica choose? Explain. [7 Marks] b) Plot the cumulative distribution functions (CDFs) for Project Alpha and Project Beta on the same graph. How do they compare? Use the graph to explain intuitively what project would any risk-averse decision-maker prefer, and why. Discuss. [8 Marks] [Instruction: Add an image in your answer] Message * Font family Font size Paragraph H 4 X B I US X X (> # E E