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What is the individual expected wealth

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Reference no: EM133080490

An individual has his portfolio invested in such a way that its possible values are:

$70,000 with probability .25

$60,000 with probability .25

$50,000 with probability .50

The individual's expected utility function is 1 - 5000/w where W is wealth.

a. What is the individual's expected wealth?

b. What is the individual's expected utility?

c. Suppose the individual has the opportunity to change his portfolio. The new portfolio would be:

$85,000 with probability .25

$60,000 with probability .25

$45,000 with probability .50

Would the individual go with this? Explain.

Reference no: EM133080490

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