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 Investment \text { Investment } \quad \quad

Question 9

Multiple Choice

 Investment \text { Investment } \quad \quad \quad \quad  A \text { A } \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad  B \text { B }
\begin{array}{|l|l|l|l|l|}\hline\\begin{array}{l}\text { State } \\\text { description }\end{array} & \text { Bad state } & \text { Good state } & \text { Bad state } & \text { Good state } \\\hline \text { Probability } & 0.5 & 0.5 & 0.5 & 0.5 \\\hline \text { Payoff } & 200 & 220 & 400 & 435 \\\hline\end{array}
-Assume the information in the table regarding the probability and payoffs of assets A and B relates to an investor that has a log utility function.By how much will the utility of asset B exceed that of asset A for this investor?


A) 0.712 -0.712
B) 0.687 -0.687
C) 0.687 0.687
D) 0.712 0.712

Correct Answer:

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