To maximize her expected utility, which one of the following investment alternatives would she choose? Assume an investor with the following utility function: U = E(r) 3/2(s2).
A) A portfolio that pays 10% with a 60% probability or 5% with 40% probability.
B) A portfolio that pays 10% with 40% probability or 5% with a 60% probability.
C) A portfolio that pays 12% with 60% probability or 5% with 40% probability.
D) A portfolio that pays 12% with 40% probability or 5% with 60% probability.

Question

Quizplus · Accepted Answer

U(c) = 9.02%; highest utility of possibilities.

To Maximize Her Expected Utility, Which One of the Following