Nadge wants to invest and she has the choice between two assets: asset A and asset B. Knowing that the returns depend on the financial markets, she estimates the chances that the market is doing well at 25%. If the financial market is doing well, asset A will earn him $750 while asset B will earn him $850. On the contrary, if the financial market is bad, asset A will earn him $200 while asset B will earn him $150.

Question 1:

Draw the decision tree associated with these scenarios.

Question 2:

If Nadge is risk neutral, what investment will she choose? Explain.