Risk preferences Investment 1 has a 50% chance of paying $100 and a 50% chance of paying $200. Investment 2 has a 50% chance of

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Risk preferences Investment 1 has a 50% chance of paying $100 and a 50% chance of paying $200. Investment 2 has a 50% chance of paying $50 and a 50% chance of paying $250. Both investments cost $130 today.

a. What are the expected payoff and return for each investment?

b. Which investment does a risk-seeking investor prefer?

c. Which investment does a risk-neutral investor prefer?

d. Which investment does a risk-averse investor prefer?

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