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Exercise 1 Consider an investor whose preferences for lotteries 2 = (W:=) are represented by an expected utility U(L) .-.u(W.) who can allocate his wealth M between two assets, a risk-free asset with return; 0.007 and a nisk asset with retum i 0.09 and variance 0.01. Name a, e 0. M the amoumt invested in the risky asset. Slate whether each of the following statement is true. false, or there is not enough information to answer. Explain your ans WT (a) Take ulur) Vi. If the investor chooses to invest a, = 100 when M 300, then he chooses ( = 150 when M = 150. (b) Take u(z) = 7 - 4. If the investor chooses to invest a = 100 when N = 300, then he chooses 4 = 100 when M 150. (e) Take u(x) = 7 - exp(-22). If the investor chooses to invest a - 100 when N = 300, then he chooses a 150 when M 450. HE Exercise 1 Consider an investor whose preferences for lotteries 2 = (W:=) are represented by an expected utility U(L) .-.u(W.) who can allocate his wealth M between two assets, a risk-free asset with return; 0.007 and a nisk asset with retum i 0.09 and variance 0.01. Name a, e 0. M the amoumt invested in the risky asset. Slate whether each of the following statement is true. false, or there is not enough information to answer. Explain your ans WT (a) Take ulur) Vi. If the investor chooses to invest a, = 100 when M 300, then he chooses ( = 150 when M = 150. (b) Take u(z) = 7 - 4. If the investor chooses to invest a = 100 when N = 300, then he chooses 4 = 100 when M 150. (e) Take u(x) = 7 - exp(-22). If the investor chooses to invest a - 100 when N = 300, then he chooses a 150 when M 450. HE

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