QUESTION THREE (11 pts). An investor with initial wealth y is deciding whether to invest it in a riskless asset or in a risky asset. The riskless asset has a fixed rate of return of r>0. The risky asset has 2 possible rates of return, L and H, with an average rate of return of E(i)=pLL+pHH. (i) (2 pts). What is the investor's expected wealth from investing in the risky asset? (ii) (2 pts). Suppose the investor's utility is a linear transformation of their wealth, u()= A(), where A is some positive constant. What does this imply about the investor's risk attitudes? (iii) (2 pts). What is the investor's expected utility from investing in the risky asset? (iv) (\& pts). What is the investor's utility from investing in the riskless asset? (v) (3pts). Derive a condition under which the investor will prefer the risky asset. Interpret. QUESTION THREE (11 pts). An investor with initial wealth y is deciding whether to invest it in a riskless asset or in a risky asset. The riskless asset has a fixed rate of return of r>0. The risky asset has 2 possible rates of return, L and H, with an average rate of return of E(i)=pLL+pHH. (i) (2 pts). What is the investor's expected wealth from investing in the risky asset? (ii) (2 pts). Suppose the investor's utility is a linear transformation of their wealth, u()= A(), where A is some positive constant. What does this imply about the investor's risk attitudes? (iii) (2 pts). What is the investor's expected utility from investing in the risky asset? (iv) (\& pts). What is the investor's utility from investing in the riskless asset? (v) (3pts). Derive a condition under which the investor will prefer the risky asset. Interpret