Suppose the manager in Technical Problem 4 can avoid the risky decision in that problem by choosing instead to receive with certainty a sum of money exactly equal to the expected profit of the risky decision in Technical Problem 4.
a. The utility of the expected profit is __________.
b. Compare the utility of the expected profit with the expected utility of the risky decision (which you calculated in part b of Technical Problem 4). Which decision yields the greatest expected utility for the manager?
c. Is your decision in part b consistent with the manager’s attitude toward risk, as it is reflected by the utility function for profit? Explain.

Data From Problem 4

A manager’s utility function for profit is U(π) = 20π, where π is the dollar amount of profit. The manager is considering a risky decision with the four possible profit outcomes shown here. The manager makes the following subjective assessments about the probability of each profit outcome:

Probability                 Profit
                                  outcome
0.05 .......................-$10,000
0.45  .........................-2,000
0.45  ..........................4,000
0.05  ........................20,000