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You can answer Question 3 Only (I give you the answer for question2, cause you need it to answer question 3) Please answer Question3 in
You can answer Question 3 Only (I give you the answer for question2, cause you need it to answer question 3)
Please answer Question3 in detail
The answer for Question2 is:
lFor stock C:
E(r)=0.21, A=4, =0.16
The expected utility= E(r)-0.5A=0.21-0.5*4*=0.21-0.0512=0.1588
lFor stock D:
E(r)=0.25, A=4, =0.21
The expected utility= E(r)-0.5A=0.25-0.5*4*=0.25-0.0882=0.1618
Therefore, the investor will choose stock D, because stock D has more expected utility.
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