Question: 8. Suppose that the world can be described using two states and two stocks Yand 2 are available. We assume the stocks' future prices have

8. Suppose that the world can be described using two states

8. Suppose that the world can be described using two states and two stocks Yand 2 are available. We assume the stocks' future prices have the following distributions State Future Prices Stock Y Future Prices Stock Z 1 2 $10 $20 $15 $11 The initial prices for the stocks are: Y(1) = $13, Z(1) = $10. Our utility function in (wl, w2) space is U(wl, w2) = wl X w2, where U represents the utility level. Now we have an initial endowment of $420. How many shares and what positions of Y and Z should we choose to build our portfolio so that we actually maximize our utility function? (Assume fractional shares are permitted.) 9 What no

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