Question: Arnab is a risk-averse decision maker whose utility function is given by U(I) = I , where I denotes Arnab's monetary payo. Arnab has Rs.

Arnab is a risk-averse decision maker whose utility function is given by U(I) = I , where I denotes Arnab's monetary payo. Arnab has Rs. 6,00,625. He can either keep this, or he can invest all this money in a machine tools factory. If he invests, then he may end up with Rs. 10,00,000 with probability 0.6, or Rs. 250,000 with probability 0.4. Should Arnab invest in this factory?

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