Question 01 Adam, Brian, Chris are friends whose preferences over wealth, W, can be represented by the utility functions: U^(W) = W2, Us(W) = 2W, and US(W) = VW. All three friends are offered the same lottery, L, in which they can get wither $36 or $16. The probability of getting the highest value is 20%. Consider the expected value, E(L), and the variance, Var(L), of lottery L. Which of the following alternatives is correct? (a) E(L) = $20 and Var(L) = $64 (b) E(L) = $26 and Var(L) = $100 (c) E(L) = $10 and Var(L) = $36 (d) E(L) = $4.40 and Var(L) = $0.64 Question 02 Consider the same information in question 01. Compute each friend's expected utility with the lottery, E[U(L)], and utility over the lottery's expected value, U[E(L)]. Which of the following alternatives is correct? (a) For Adam: E[U(L)] = 400 and U[E(L)] = 464 (b) For Brian: E[U (L)] = 20 and U [B(L)] = 20 (c) For Chris: E[U(L)] = 4.40 and U[E(L)] = V0.64 = 0.80 (d) For Chris: E[U(L)] = 4.40 and U[E(L)] = V20 ~ 4.47