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An investor is to purchase one of three options; D1, D2, or D3. The future state of nature will determine how much profit the investor will make in each situation. To fill in values of the payoff table you need to use your student code number and look on the Excel Sheet2 to put your numbers in (I simulated values for you - you should use what I have for you):
Purchase
State 1
State 2
D1
49
31
D2
41
38
D3
44
30
a-say the individual is a risk avoider. Create a table with plausible values of utility for a risk avoider.
b-calculate the expected utility of each decision when the probability of State 1 is .6 (and so the probability of State 2 =.... since there are only two states.).
c-state which is the best option under the expected utility concept and state the numerical value of expected utility in this case. (please do not just highlight information you did in step b and expect me to pick out the best - you can highlight, but you also have to write it out).
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