# Calculate the expected utility of each project and identify the preferred project according to this criterion.

An individual is considering two investment projects. Project A will return a zero profit if conditi Show more An individual is considering two investment projects. Project A will return a zero profit if condition are poor a profit of \$4 if conditions are good and a profit of \$8 if conditions are excellent. Project B will return of \$2 if conditions are poor aprofit of \$3 if conditions are good and a profit of \$4 if conditions are excellent. The probability distribution of conditions is as follows: Condtions: Poor Good Excellent Probability: 40% 50% 10% (a) Using Excel calculate the expected value of each project and identify the preferred project according to this criterion. (b) Assume that the indivduals utility function for profit is U(X) =X-0.05X2. Calculate the expected utility of each project and identify the preferred project according to this criterion. (c) Is this individual risk averse risk neutral or risk seeking? Why? Show less

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