An individual is considering two investment projects. Project A will return a zero prof t if conditions are poor, a profit of $4 if conditions are good, and a profit of $8 if conditions are excellent. Project B will return a prof t of $2 if conditions are poor, a prof t of $3 if conditions are good, and a prof t of $4 if conditions are excellent. The probability distribution of conditions is as follows:

(a) Using Excel, calculate the expected value of each project and identify the preferred project according to this criterion. (b) Assume that the individual’s utility function for prof t is U(X) = X – 0.05X 2. Calculate the expected utility of each project and identify the preferred project according to this criterion. (c) Is this individual risk averse, risk neutral, or risk seeking? Why?

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