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We now have $15,000 in assets and are given a choice between investment 1 and...

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Finance

We now have $15,000 in assets and are given a choice between investment 1 and investment 2. With investment 1, 70% of the time we increase our asset position by $255,000, and 30% of the time we increase our asset position by $85,000. With investment 2, 50% of the time we increase our asset position by $595,000, and 50% of the time we increase our asset position by $5,000. Our utility function for final asset position x is u(x). We are given the following

values for u(x): u(0)= 0, u(640,000)= .80, u(810,000) =.90, u(0)= 0, u(90,000)= .30, u(1,000,000)= 1, u(490,000) = .7.

a) Are we risk-averse, risk-seeking, or risk-neutral?

b) Will we prefer investment 1 or investment 2?

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