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Last year, Esther had $2 million and chose to invest in a long stock position in firm ABC. Today, that position is worth only $1
- Last year, Esther had $2 million and chose to invest in a long stock position in firm ABC. Today, that position is worth only $1 million.
- Last year, Maurice had $500 and chose to invest in put options on firm ABC. Today, that position is worth $1 million.
According to expected utility theory (as in Von NeumannMorgenstern), who is happier today as a result of their wealth?
A.Esther, because she can use the loss to lower her tax bill
B.Maurice, because he made more on his trade
C.Esther, because she used to have more ($2million)
D.They are the same in happiness, because they both have $1million now.
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