Richard is a stock market day trader.His utility of wealth function is Richard has seen a recent upward trend in the price of Yahoo stock.He feels that there is a 30% chance the stock will rise from $175 per share to $225.Otherwise,he believes the stock will settle to about $150 per share.Richard's current wealth is $1.75 million.Assume that if Richard purchases the stock,he will use his entire wealth.Given his risk preferences,will Richard buy Yahoo?

Question

Richard is a stock market day trader.His utility of wealth function is  Richard has seen a recent upward trend in the price of Yahoo stock.He feels that there is a 30% chance the stock will rise from $175 per share to $225.Otherwise,he believes the stock will settle to about $150 per share.Richard's current wealth is $1.75 million.Assume that if Richard purchases the stock,he will use his entire wealth.Given his risk preferences,will Richard buy Yahoo?

Quizplus · Accepted Answer

The Answer of Richard is a stock market day trader.His utility of wealth function is  Richard has seen a recent upward trend in the price of Yahoo stock.He feels that there is a 30% chance the stock will rise from $175 per share to $225.Otherwise,he believes the stock will settle to about $150 per share.Richard's current wealth is $1.75 million.Assume that if Richard purchases the stock,he will use his entire wealth.Given his risk preferences,will Richard buy Yahoo?

Richard Is a Stock Market Day Trader