Assume an Investor with the Following Utility Function: U =

Multiple Choice

Assume an investor with the following utility function: U = E(r) − 0.60(s²) . To maximize her expected utility, which one of the following investment alternatives would she choose?

A) A portfolio that pays 10% with a 60% probability or 5% with 40% probability.
B) A portfolio that pays 10% with 40% probability or 5% with a 60% probability.
C) A portfolio that pays 12% with 60% probability or 5% with 40% probability.
D) A portfolio that pays 12% with 40% probability or 5% with 60% probability.