Risk Preferences 4. The utility function over wealth. w, is given by the function, U(w) = J1? I have w = $100 which I can either invest in the stock market (Option A) or keep as cash (Option B). Ogtfon A: If I invest in the stock market, my future wealth is either, 51 = $150 or 32 = $50 with equal probability, i.e. p = 1 p = 0.5. Option B: if I keep my wealth as cash, I face no risk. but also get no return, so that my future stays w = $100. a) What is my expected value of wealth under Option A? b) What is my expected utility under Option A? Under Option 8? Compare. 0) What is the Certainty Equivalent for Option A? There is a third option for investment (Option C), which has the following risk prole, 51 = $280, 52 = $40 1:): 0.25, 1p= 0.75 d) Redo parts a) to c). 9) Compare your answers to expected utility and the certainty equivalent for Option A and Option C