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excellent. The probably distribution of the conditions is as
follows:
Conditions:
Poor
Good
Excellent
Probability
40%
50%
10%
Using Excel, calculate the expected value of each project and
identify the preferred project according to this criterion.
Assume that the individual’s 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.
Is this individual risk adverse, risk neutral, or risk seeking?
Why?
Froeb et al.’s Chapter 17:
a) Individual problems: 17–1 and 17–4.