You are Here: Home >< Maths

# Expected Values Questions Watch

1. Could someone confirm/point me in the right direction with my answers to the below question please? Thanks a lot.

Winston has total wealth of GBP10,000 and utility function u(x) = SQRT(x). He has
a choice between two investment opportunities, investment project A and investment project B. With probability 50% an investment project performs well and earns him a return of 44%, otherwise it goes badly and he loses 19% of his investment.
(a) Calculate Winston?s expected utility if he invests his entire wealth in project A.
(b) Calculate Winston?s expected utility if he invests his entire wealth in project B.
(c) Suppose that Winston knows that project A performs badly if and only if project B performs badly. Calculate his expected utility if he invests half his wealth in project A, the other half in project B.
(d) Suppose that Winston knows that project A performs badly if and only if project B performs well. Calculate his expected utility if he invests half his wealth in project A, the other half in project B.

(a) (0.5 x SQRT(1.44 x 10000)) - (0.5 x SQRT(0.19 x 10000)) = 38.21
(b) Same as (a).
(c) If B performs well then A must perform well. But if B performs badly then must A also perform badly?
(d) If B performs badly then A must perform well. But if B performs well then must A perform badly?

Thanks again for any help

TSR Support Team

We have a brilliant team of more than 60 Support Team members looking after discussions on The Student Room, helping to make it a fun, safe and useful place to hang out.

This forum is supported by:
Updated: December 13, 2010
Today on TSR

### Degrees to get rich!

... and the ones that won't

### Cambridge interviews pour in...

Discussions on TSR

• Latest
• ## See more of what you like on The Student Room

You can personalise what you see on TSR. Tell us a little about yourself to get started.

• Poll
Useful resources

### Maths Forum posting guidelines

Not sure where to post? Read the updated guidelines here

### How to use LaTex

Writing equations the easy way

### Study habits of A* students

Top tips from students who have already aced their exams

## Groups associated with this forum:

View associated groups
Discussions on TSR

• Latest
• ## See more of what you like on The Student Room

You can personalise what you see on TSR. Tell us a little about yourself to get started.

• The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.