Marie has $1,500 that she wishes to invest for one year. She has narrowed her choices down to one of the following two actions: 1. Buy bonds of Risky Mining Ltd. These pay 14.4% interest, unless Risky goes bankrupt, in which case Marie will lose her principal and interest. 2. Buy savings bonds, paying 6.4% interest. Marie assesses her prior probability of Risky Mining Ltd. going bankrupt as 0.40. The savings bonds will pay off regardless of whether Risky goes bankrupt or not. Maries utility for money is given by the square root of the amount of her gross payoff. That is, if she buys the savings bonds her gross payoff is $1,596, etc. Marie is a rational decision maker. Required 1. Based on her prior probabilities, which action should Marie take? Show your calculations. 2. 1. Before making a final decision, Marie decides she needs more information. She obtains Risky Minings current financial statements and examines its debtequity ratio. This ratio can be either HI or LO. Upon calculating the ratio, Marie observes that it is LO. Based on her prior experience in bond investments, Marie knows the following conditional probabilities: Debt-to-Equity Ratio Future State LO HI NB (Not Bankrupt) 0.50 0.50 B (Bankrupt) 0.05 0.95