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We now have $45,000 in assets and are given a choice between investment 1 and investment 2. With investment 1. 60% of the time we
We now have $45,000 in assets and are given a choice between investment 1 and investment 2. With investment 1. 60% of the time we increase our asset position by $255,000, and 40% of the time we increase our asset position by $85,000. With investment 2. 45% of the time we increase our asset position by $560,000, and 55% of the time we increase our asset position by $5.000. Our utility function for final asset position x is u(x). We are given the following values for u(x): (0)= 0, (640,000)= .80, u(810,000) = 90, u(0)= 0. (90,000)= .30, (1,000,000)= 1. (490,000) = .7. a) Are we risk-averse, risk-seeking, or risk-neutral? b) Will we prefer investment 1 or investment 2
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