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Question 2. (15 marks) Bob has wealth of 100 and wants to invest it. There are two assets: a safe asset and a risky asset.
Question 2. (15 marks) Bob has wealth of 100 and wants to invest it. There are two assets: a safe asset and a risky asset. If Bob invests his 100 in the safe asset, he will end up with 100. If Bob invests his 100 in the risky asset, he will end up with 100r. Bob believes that r is a uniform random variable with support [0, 4]. Bob is an expected utility maximiser with von Neumann-Morgenstern utility u(x) = . Charlie is a nancial expert who can provide reliable information on the risky investment. Charlie will send Bob one of the following messages: Message Probability of Message
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