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Find the expected return and standard deviation

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Reference no: EM132040702

Suppose two investments firms have the same three payoffs, but the probability associated with each payoff differs as illustrated in the table below.

PAYOFF Probability (Investment A) Probability (Investment B)

N5000 0.2 ?

N3000 0.6 0.5

N1500 ? 0.1

(i) Complete the missing values (?) in the table

(ii) Find the expected return and standard deviation of each investment

(iii) Polu has the utility function U = 2*I^2 where I denotes the payoff. Which investment will he choose.

Reference no: EM132040702

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