U = E(r) - (A/2)s 2 , where A = 4.0. $\begin{array}{lll}
\underline{\text { Investment }} & \underline{\text { Expected Return E(r) }} &\underline{ \text { Standard Deviation }} \
1 & 0.12 & 0.3 \
2 & 0.15 & 0.5 \
3 & 0.21 & 0.16 \
4 & 0.24 & 0.21
\end{array}$

-Based on the utility function above,which investment would you select?
A)1
B)2
C)3
D)4
E)cannot tell from the information given

Question

U = E(r) - (A/2)s 2 , where A = 4.0. $\begin{array}{lll}
\underline{\text { Investment }} & \underline{\text { Expected Return E(r) }} &\underline{ \text { Standard Deviation }} \
1 & 0.12 & 0.3 \
2 & 0.15 & 0.5 \
3 & 0.21 & 0.16 \
4 & 0.24 & 0.21
\end{array}$

-Based on the utility function above,which investment would you select?
A)1
B)2
C)3
D)4
E)cannot tell from the information given

Quizplus · Accepted Answer

The utility function U = E(r) - (A/2)s^2 is used to evaluate investments. Plugging in the values for each investment, Investment 3 has the highest utility value, making it the best choice.

U = E(r) - (A/2)s2, Where a = 4 -Based on the Utility Function Above,which Investment Would You Select

U = E(r) - (A/2)s², Where a = 4 -Based on the Utility Function Above,which Investment Would You Select