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6. Two individuals, each with $100,000 to invest, have asked you for advice in their...

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6. Two individuals, each with $100,000 to invest, have asked you for advice in their in- vestment decisions. They have a common set of six available investments from which they must choose one. The distributions of investment returns are given in the following table. -2 -1 0 1 10 11 12 13 14 Asset A B .1 1 .1 .1 .1 .1 .1 Probability that yield will be: 2 3 4 5 6 7 8 9 .4 .2 2 .2 .1 .1 .1 .2 .2 .2.2 .2 .2 .1 .1 .1 .4 .6 2 .1 .1 .1 2 .1 .2 D E F .2 .1 .1 .1 a. The first individual leaves you unsure as to whether he is risk averse. What advice can you give him? b. The second individual is definitely the nervous type, and you assume therefore that he is risk averse. What is your advice to him? c. Reorder the six investment projects using the mean-variance criterion. d. Is the mean-variance ranking the same as that achieved by second-order stochastic dominance

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