Question Please note that this problem has four parts (a, b, c, and d) You may need to scroll the screen down, navigate left and right to see the whole problem Clearly label your parts when answering You are allowed a Minimum of 1 File, Maximum of 3 Files for this problem Must use a pen to answer Show all calculations results to FOUR PLACES AFTER THE DECIMAL POINT (except when all succeeding digits are zeros) Must Show all calculations steps Failure to do so will result in a score of O even final answer is correct Suppose Victoria faces an investment decision in which she must think about cash flows in two different years Regard these two cash flows as two different attributes, and let X represent the cash flow in Year 1, and the cash flow in Year 2 She has assessed her individual utility functions for X and Y, and has fitted exponential utility functions to them Ux(x) 1 675 2 214 e X 25250 Uy(y) 2 214 4 2945 e y 23740 Ux($7044 44) 0 Uy($15728 56) 0 Ux($9413 36) 0 15 Uy($17394 04) 0 15 Ux($13154 35) 0 36 Uy($18573 03) 0 25 Ux($14944 46) 0 45 Uy($19185 24) 0 30 Ux($15996 70) 0 50 Uy($19813 65) 0 35 Ux($17094 70) 0 55 Uy($21529 91) 0 48 Ux($18242 62) 0 60 Uy($22508 15) 0 55 Ux($19445 23) 0 65 Uy($23232 43) 0 60 Ux($22037 25) 0 75 Uy($23979 50) 0 65 Ux($23440 39) 0 80 Uy($25548 10) 0 75 Ux($24926 11) 0 85 Uy($26373 06) 0 80 Ux($26504 75) 0 90 Uy($27227 73) 0 85 Ux($28188 71) 0 95 Uy($29035 30) 0 95 Ux($29993 05) 1 00 Uy($29993 46) 1 00 Furthermore, she has decided that utility independence hold, and so these individual utility functions for each cash flow are appropriate regardless of the amount of the other cash flow She also has made the following assessments She would be indifferent between a sure outcome of $19445 23 for Year 1 and $21529 91 for Year 2 and a risky investment with 40 chance of outcome of $22037 25 for the Year 1 and $27227 73 for the Year 2, 20 chance of outcome of $13154 35 for the Year 1 and $18573 03 for the Year 2, and 40 chance of outcome of $17094 70 for the Year 1 and $19813 65 for the Year 2, She would be indifferent between a risky investment with 72 chance of outcome of $14944 46 for the Year 1 and $25548 10 for the Year 2, and a 28 chance at $18242 62 for Year 1 and $29035 30 for the Year 2 and a sure outcome of $7044 44 for Year 1 and $29993 46 for Year 2 (a) Use her assessments to find scaling constants Kx and Ky, where scaling constant related to cash flow in Year 1 is represented by Kx and scaling constant related to cash flow in Year 2 is represented by Ky (Must show all works justification to get full marks) (b) Should she consider these two attributes to be substitutes or complements Why or why not (c) Specify her full two attribute utility function for year1 and year2 cash flow (d) Use the full two attribute utility function for the given scenario to recommend the best alternative among alternatives J, K and M in the following decision tree Why (Must show all works justification to get full marks) Cash Flow ($) Year 1 Year 2 22037 25 19185 24 JA 0 48 Alternative J JB 28188 71 22508 15 KA 24926 11 23979 50 KB 9413 36 28478 45 Alternative K 0 66 KC 13934 35 26373 06 MA 0 22 23440 39 25548 10 Alternative M MB 20708 00 29035 30 MC 0 62 26504 75 18938 48 Question Please note that this problem has four parts (a, b, c, and d) You may need to scroll the screen down, navigate left and right to see the whole problem Clearly label your parts when answering You are allowed a Minimum of 1 File, Maximum of 3 Files for this problem Must use a pen to answer Show all calculations results to FOUR PLACES AFTER THE DECIMAL POINT (except when all succeeding digits are zeros) Must Show all calculations steps Failure to do so will result in a score of O even final answer is correct Suppose Victoria faces an investment decision in which she must think about cash flows in two different years Regard these two cash flows as two different attributes, and let X represent the cash flow in Year 1, and the cash flow in Year 2 She has assessed her individual utility functions for X and Y, and has fitted exponential utility functions to them Ux(x) 1 675 2 214 e X 25250 Uy(y) 2 214 4 2945 e y 23740 Ux($7044 44) 0 Uy($15728 56) 0 Ux($9413 36) 0 15 Uy($17394 04) 0 15 Ux($13154 35) 0 36 Uy($18573 03) 0 25 Ux($14944 46) 0 45 Uy($19185 24) 0 30 Ux($15996 70) 0 50 Uy($19813 65) 0 35 Ux($17094 70) 0 55 Uy($21529 91) 0 48 Ux($18242 62) 0 60 Uy($22508 15) 0 55 Ux($19445 23) 0 65 Uy($23232 43) 0 60 Ux($22037 25) 0 75 Uy($23979 50) 0 65 Ux($23440 39) 0 80 Uy($25548 10) 0 75 Ux($24926 11) 0 85 Uy($26373 06) 0 80 Ux($26504 75) 0 90 Uy($27227 73) 0 85 Ux($28188 71) 0 95 Uy($29035 30) 0 95 Ux($29993 05) 1 00 Uy($29993 46) 1 00 Furthermore, she has decided that utility independence hold, and so these individual utility functions for each cash flow are appropriate regardless of the amount of the other cash flow She also has made the following assessments She would be indifferent between a sure outcome of $19445 23 for Year 1 and $21529 91 for Year 2 and a risky investment with 40 chance of outcome of $22037 25 for the Year 1 and $27227 73 for the Year 2, 20 chance of outcome of $13154 35 for the Year 1 and $18573 03 for the Year 2, and 40 chance of outcome of $17094 70 for the Year 1 and $19813 65 for the Year 2, She would be indifferent between a risky investment with 72 chance of outcome of $14944 46 for the Year 1 and $25548 10 for the Year 2, and a 28 chance at $18242 62 for Year 1 and $29035 30 for the Year 2 and a sure outcome of $7044 44 for Year 1 and $29993 46 for Year 2 (a) Use her assessments to find scaling constants Kx and Ky, where scaling constant related to cash flow in Year 1 is represented by Kx and scaling constant related to cash flow in Year 2 is represented by Ky (Must show all works justification to get full marks) (b) Should she consider these two attributes to be substitutes or complements Why or why not (c) Specify her full two attribute utility function for year1 and year2 cash flow (d) Use the full two attribute utility function for the given scenario to recommend the best alternative among alternatives J, K and M in the following decision tree Why (Must show all works justification to get full marks) Cash Flow ($) Year 1 Year 2 22037 25 19185 24 JA 0 48 Alternative J JB 28188 71 22508 15 KA 24926 11 23979 50 KB 9413 36 28478 45 Alternative K 0 66 KC 13934 35 26373 06 MA 0 22 23440 39 25548 10 Alternative M MB 20708 00 29035 30 MC 0 62 26504 75 18938 48

Question

Question  Please note that this problem has four parts (a, b, c, and d)  You may need to scroll the screen down, navigate left and right to see the whole problem  Clearly label your parts when answering  You are allowed a Minimum of 1 File, Maximum of 3 Files for this problem  Must use a pen to answer  Show all calculations results to FOUR PLACES AFTER THE DECIMAL POINT (except when all succeeding digits are zeros)  Must Show all calculations steps  Failure to do so will result in a score of  O even final answer is correct  Suppose Victoria faces an investment decision in which she must think about cash flows in two different years  Regard these two cash flows as two different attributes, and let X represent the cash flow in Year 1, and the cash flow in Year 2  She has assessed her individual utility functions for X and Y, and has fitted exponential utility functions to them  Ux(x)   1 675   2 214 e  X 25250 Uy(y)   2 214   4 2945 e  y 23740 Ux($7044 44)  0 Uy($15728 56)    0 Ux($9413 36)  0 15 Uy($17394 04)  0 15 Ux($13154 35)  0 36 Uy($18573 03)  0 25 Ux($14944 46)  0 45 Uy($19185 24)  0 30 Ux($15996 70)  0 50 Uy($19813 65)    0 35 Ux($17094 70)  0 55 Uy($21529 91)  0 48 Ux($18242 62)  0 60 Uy($22508 15)  0 55 Ux($19445 23)  0 65 Uy($23232 43)  0 60 Ux($22037 25)  0 75 Uy($23979 50)  0 65 Ux($23440 39)  0 80 Uy($25548 10)  0 75 Ux($24926 11)  0 85 Uy($26373 06)  0 80 Ux($26504 75) 0 90 Uy($27227 73)  0 85 Ux($28188 71)  0 95 Uy($29035 30)  0 95 Ux($29993 05)  1 00 Uy($29993 46)  1 00 Furthermore, she has decided that utility independence hold, and so these individual utility functions for each cash flow are appropriate regardless of the amount of the other cash flow  She also has made the following assessments  She would be indifferent between a sure outcome of $19445 23 for Year 1 and $21529 91 for Year 2 and a risky investment with 40  chance of outcome of $22037 25 for the Year 1 and $27227 73 for the Year 2, 20  chance of outcome of $13154 35 for the Year 1 and $18573 03 for the Year 2, and 40  chance of outcome of $17094 70 for the Year 1 and $19813 65 for the Year 2, She would be indifferent between a risky investment with 72  chance of outcome of $14944 46 for the Year 1 and $25548 10 for the Year 2, and a 28  chance at $18242 62 for Year 1 and $29035 30 for the Year 2 and a sure outcome of $7044 44 for Year 1 and $29993 46 for Year 2  (a) Use her assessments to find scaling constants Kx and Ky, where scaling constant related to cash flow in Year 1 is represented by Kx and scaling constant related to cash flow in Year 2 is represented by Ky (Must show all works justification to get full marks) (b) Should she consider these two attributes to be substitutes or complements  Why or why not  (c) Specify her full two attribute utility function for year1 and year2 cash flow  (d) Use the full two attribute utility function for the given scenario to recommend the best alternative among alternatives J, K and M  in the following decision tree  Why  (Must show all works justification to get full marks) Cash Flow ($) Year 1 Year 2 22037 25 19185 24 JA 0 48 Alternative  J  JB 28188 71 22508 15 KA 24926 11 23979 50 KB 9413 36 28478 45 Alternative  K  0 66 KC 13934 35 26373 06 MA 0 22 23440 39 25548 10 Alternative  M  MB 20708 00 29035 30 MC 0 62 26504 75 18938 48 Question  Please note that this problem has four parts (a, b, c, and d)  You may need to scroll the screen down, navigate left and right to see the whole problem  Clearly label your parts when answering  You are allowed a Minimum of 1 File, Maximum of 3 Files for this problem  Must use a pen to answer  Show all calculations results to FOUR PLACES AFTER THE DECIMAL POINT (except when all succeeding digits are zeros)  Must Show all calculations steps  Failure to do so will result in a score of  O even final answer is correct  Suppose Victoria faces an investment decision in which she must think about cash flows in two different years  Regard these two cash flows as two different attributes, and let X represent the cash flow in Year 1, and the cash flow in Year 2  She has assessed her individual utility functions for X and Y, and has fitted exponential utility functions to them  Ux(x)   1 675   2 214 e  X 25250 Uy(y)   2 214   4 2945 e  y 23740 Ux($7044 44)  0 Uy($15728 56)    0 Ux($9413 36)  0 15 Uy($17394 04)  0 15 Ux($13154 35)  0 36 Uy($18573 03)  0 25 Ux($14944 46)  0 45 Uy($19185 24)  0 30 Ux($15996 70)  0 50 Uy($19813 65)    0 35 Ux($17094 70)  0 55 Uy($21529 91)  0 48 Ux($18242 62)  0 60 Uy($22508 15)  0 55 Ux($19445 23)  0 65 Uy($23232 43)  0 60 Ux($22037 25)  0 75 Uy($23979 50)  0 65 Ux($23440 39)  0 80 Uy($25548 10)  0 75 Ux($24926 11)  0 85 Uy($26373 06)  0 80 Ux($26504 75) 0 90 Uy($27227 73)  0 85 Ux($28188 71)  0 95 Uy($29035 30)  0 95 Ux($29993 05)  1 00 Uy($29993 46)  1 00 Furthermore, she has decided that utility independence hold, and so these individual utility functions for each cash flow are appropriate regardless of the amount of the other cash flow  She also has made the following assessments  She would be indifferent between a sure outcome of $19445 23 for Year 1 and $21529 91 for Year 2 and a risky investment with 40  chance of outcome of $22037 25 for the Year 1 and $27227 73 for the Year 2, 20  chance of outcome of $13154 35 for the Year 1 and $18573 03 for the Year 2, and 40  chance of outcome of $17094 70 for the Year 1 and $19813 65 for the Year 2, She would be indifferent between a risky investment with 72  chance of outcome of $14944 46 for the Year 1 and $25548 10 for the Year 2, and a 28  chance at $18242 62 for Year 1 and $29035 30 for the Year 2 and a sure outcome of $7044 44 for Year 1 and $29993 46 for Year 2  (a) Use her assessments to find scaling constants Kx and Ky, where scaling constant related to cash flow in Year 1 is represented by Kx and scaling constant related to cash flow in Year 2 is represented by Ky (Must show all works justification to get full marks) (b) Should she consider these two attributes to be substitutes or complements  Why or why not  (c) Specify her full two attribute utility function for year1 and year2 cash flow  (d) Use the full two attribute utility function for the given scenario to recommend the best alternative among alternatives J, K and M  in the following decision tree  Why  (Must show all works justification to get full marks) Cash Flow ($) Year 1 Year 2 22037 25 19185 24 JA 0 48 Alternative  J  JB 28188 71 22508 15 KA 24926 11 23979 50 KB 9413 36 28478 45 Alternative  K  0 66 KC 13934 35 26373 06 MA 0 22 23440 39 25548 10 Alternative  M  MB 20708 00 29035 30 MC 0 62 26504 75 18938 48

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