Mandisa owns a boat that is harboured on the east coast at Richards Bay. Currently, there is a tsunami that is approaching the harbour. If the tsunami strikes the harbour, the value of her investments will be diminished by the value of her boat, as it will be destroyed. The value of her boat is R350 000. It would cost Mandisa R16 000 to move the boat to a harbour out of the path of tsunami.

Mandisa's utility of Investment function is U(I) = (I/1000000)²or U(I) = ()²

Mandisa's current Investment assets are worth R3 million including the value of the boat. Past evidence has influenced Mandisa to believe that the tsunami will likely miss the harbour, and so she plans not to move her boat. Suppose the probability the tsunami will strike Mandisa's harbour is 0.7.

A) Calculate Mandisa's expected utility given that she will not move her boat. (5)