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QUESTION
Investments A and B both cost $100,000 and each promises a single payoff in one year. The distribution of payoffs for each investment appears below.
Investments A and B both cost $100,000 and each promises a single payoff in one year. The distribution of payoffs for each investment appears below. Ignoring possible differences in non-diversifiable risk, which investment would a risk-averse investor prefer, and why? (A risk averse person means … someone who dislikes risk).
