Problem - 10 Suppose you face an investment decision in which you must think about cash two different years. Regard these two cash flows as two different attributes, and let X represent the cash flow in Year 1, and Y the cash flow in Year 2. The maximum cash flow you could receive in year 1 is $20,233, while in year 2 is $19,893; and The minimum cash flow you could receive in year 1 is $5010, while in year 2 is $4967.74. You have assesses your individual utility functions for Xand Y , and have fitted exponential utility functions to them: Uy(x) =1.05 2.86 % Uy(y) =1.29-2.12 e /10,000 Furthermore, you have decided that utility independence holds, and so these individual utility functions for each cash flow are appropriate regardless of the amount of the other cash flow. You also have the following assessments: e You would be indifferent between a sure outcome of $7501.2 for year 1 & $7504.17 for year 2, and risky investment with 50% chance of $20,233 for year 1 & $19,893 for year 2. with 50% chance of $5010 for year 1 & $4967.74 for year 2. e You would be indifferent between getting (1) $18,009.35 the first year and $4967.74 the second , and (2) getting $5010 the first year and $19,893 the second. Use these assessments to find the scaling constants kx and ky. What does the a) value of (1-k-ky) imply about the cash flows of the different periods? b) Write out your full two- attribute utility function for year 1 (X) and year 2 (Y) ) Use this function to choose between Alternatives A and B for the following tree. 1 Cash Flows Year1 Year2 $10,000 $10,000 $100 $100 $1,000 $100 $100 $1,000