Question: Assume an investor with the following utility function: U = E ( r ) - 3/2( s 2 ). To maximize her expected utility, which

Assume an investor with the following utility function: U = E(r) - 3/2(s2).

To maximize her expected utility, which one of the following investment alternatives would she choose?

Select one:

a.

A portfolio that pays 10% with a 60% probability or 5% with 40% probability.

b.

A portfolio that pays 10% with 40% probability or 5% with a 60% probability.

c.

A portfolio that pays 12% with 60% probability or 5% with 40% probability.

d.

A portfolio that pays 12% with 40% probability or 5% with 60% probability.

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