Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 4

A young couple has $5,000 to invest in either savings bonds or a real estate deal. The expected return on each investment, given good and bad economic conditions, is shown in the following payoff table:
The expected value of investing in savings bonds is $1,000, and the expected value of the real estate investment is $5,200. However, the couple decides to invest in savings bonds. Explain the couple's decision in terms of the utility they might associate with each investment.