The following graph illustrates the utility functions for both Rashawn and Juliana, who both have the same amount of wealth:

a. Based on the graph, who is more risk averse, Rashawn or Juliana?

b. Both Juliana and Rashawn work for the same company, which announces a new investment option for their retirement plan. This new option has a 50% chance of increasing their wealth by $10,000 and a 50% chance that it will cause them to lose $3,000 in wealth. Based on their utility functions, would either of them choose to transfer the value of their 401k into the new investment option?

Transcribed Image Text:

Utility $3,000 Initial loss wealth Juliana's utility Rashawn's utility $10,000 gain Wealth