Suppose an investor, Erik, is offered the investment opportunities described in the table below. Each investment...

 

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Suppose an investor, Erik, is offered the investment opportunities described in the table below. Each investment costs $1,000 today and provides a payoff, also described below, one year from how. Option Payoff One Year from Now 1. 100% chance of receiving $1,100 2 50% chance of receiving $1,000 50% chance of receiving $1,200 50% chance of receiving $200 s0% chance of recelving $2,000 It Erik is risk averse, which investment will he prefer? O The investor will choose option 1. The investor will choose option 2. The investor will choose option 3. O The Investor will be indifferent toward these options. In contrast to his brother Erik, Devin is a risk lover (or exhibits risk seeking behavior). vhich of the following statements is true about Devin? O Everything else remaining constant, Devin will prefer option 3. Everything else remaining constant, Devin will prefer option 2. O Everything else remaining constant, Devin will prefer option 1. O None of these options is preferred. Suppose an investor, Erik, is offered the investment opportunities described in the table below. Each investment costs $1,000 today and provides a payoff, also described below, one year from how. Option Payoff One Year from Now 1. 100% chance of receiving $1,100 2 50% chance of receiving $1,000 50% chance of receiving $1,200 50% chance of receiving $200 s0% chance of recelving $2,000 It Erik is risk averse, which investment will he prefer? O The investor will choose option 1. The investor will choose option 2. The investor will choose option 3. O The Investor will be indifferent toward these options. In contrast to his brother Erik, Devin is a risk lover (or exhibits risk seeking behavior). vhich of the following statements is true about Devin? O Everything else remaining constant, Devin will prefer option 3. Everything else remaining constant, Devin will prefer option 2. O Everything else remaining constant, Devin will prefer option 1. O None of these options is preferred.

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