$2.$ Given the two security choices described below, which security would be selected by

a risk$-$averse investor?

Security A is a risk$-$free security with a return equal to $8\mathrm{.}0\%.$

Security B is a risky security that pays $-4\%$ or $+20\%$ with equal probability.

a$)$ Security A would be selected by a risk$-$averse investor

b$)$ Security B would be selected by a risk$-$averse investor

c$)$ A risk$-$averse investor would be indifferent between Security A and Security

B

d$)$ The answer cannot be determined without knowing the investor$$s exact risk$-$

aversion level and utility function.