A business owner is considering four possible investment strategies. The payoff of the investment depends on...

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A business owner is considering four possible investment strategies. The payoff of the investment depends on how well the economy is doing. Some investments are more sensitive to economic downturns (i.e., recessions) than others. Assume that the probability of a recession is 0.3 and the probability of a good economy is 0.7. The payoff of the four investments is as follows: Good Economy Payoff (Thousands of Strategy Probability of Recession Recession Payoff (Thousands Probability of of dollars) Good Economy dollars) A 0.3 60 0.7 20 B 0.3 60 0.7 60 C 0.3 10 0.7 D 0.3 0 0.7 50 80 The business owner cares only about the expected payoff and possibly the variance of each strategy. The following table shows the payoffs under "bad luck" and "good luck" and the associated probabilities in thousands of dollars. [Make sure to include the tables and the calculations below in your document.] a. Using a spreadsheet, determine the expected value and variance for each strategy. b. Which strategy would be chosen by a risk-neutral investor? A risk-preferring investor? c. Can we rule out any strategies if we know only that the investor is risk-averse? d. Now assume that the risk-averse investor's utility is U(X) = 10x0.5. Which strategy will be chosen by this investor? A business owner is considering four possible investment strategies. The payoff of the investment depends on how well the economy is doing. Some investments are more sensitive to economic downturns (i.e., recessions) than others. Assume that the probability of a recession is 0.3 and the probability of a good economy is 0.7. The payoff of the four investments is as follows: Good Economy Payoff (Thousands of Strategy Probability of Recession Recession Payoff (Thousands Probability of of dollars) Good Economy dollars) A 0.3 60 0.7 20 B 0.3 60 0.7 60 C 0.3 10 0.7 D 0.3 0 0.7 50 80 The business owner cares only about the expected payoff and possibly the variance of each strategy. The following table shows the payoffs under "bad luck" and "good luck" and the associated probabilities in thousands of dollars. [Make sure to include the tables and the calculations below in your document.] a. Using a spreadsheet, determine the expected value and variance for each strategy. b. Which strategy would be chosen by a risk-neutral investor? A risk-preferring investor? c. Can we rule out any strategies if we know only that the investor is risk-averse? d. Now assume that the risk-averse investor's utility is U(X) = 10x0.5. Which strategy will be chosen by this investor?