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100BMT1S11C-1

# 100BMT1S11C-1 - Name Perm TA Econ 100B(Grossman)Spring 2011...

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Name: Perm: TA: Econ 100B (Grossman)—Spring 2011 Midterm 1—Version C April 19, 2011 Instructions: This is a closed-book, closed-notes exam. No calculators or electronic devices are allowed. Please turn o ff and put away all phones and other electronic devices. There are 8 multiple-choice questions and two free-response questions. Answer as many as you can in the time allowed. I do not expect everyone to be able to answer all questions. If you get stuck on something, I suggest moving on and coming back later when/if you have time. If you have a question, please raise your hand. Good luck! Multiple choice – 25 out of 50 pts. (8 qns., 3 pts. each + 1) Answer these questions on your Scantron. Your score will only be based on the marks on your Scantron. You will not receive any credit for anything written on your exam paper. You will receive 1 extra point for correctly writing your name, perm number, version (A,B,C, or D), and TA’s name on your Scantron. Exams without the version marked will be assigned the average score for all four versions. 1. You have \$60 and have decided to invest it in the stocks of two companies: Google and Bing. The stock of Google cost \$10/share and Bing stock costs \$5/share. In one scenario, Google stock will be worth \$30 and Bing will be worth \$8. In the only other scenario, which is equally likely, Google will be worth \$10/share Bing will be worth \$12/share. Assuming you are risk averse, which of the following investment options yield the greatest expected utility? (a) All three of these options are the same. (b) Spend 30 dollars on Google and 30 dollars on Bing. (c) Spend all your money on Google stock. (d) Spend all your money on Bing stock.

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