Imagine that Eva, who has a current wealth of $15,000, receives an unexpected opportunity to invest in one of two startup companies. Her utility function over the wealth she will have after the investment, Z (which equals her current wealth plus or minus any amount she gains or loses from the investment), is U(Z) = V. Investment 1: She can invest $2,000 in Startup A. If the startup succeeds, which happens with a probability of 25/100, she triples her investment; otherwise, she loses her $2,000 investment. Investment 2: She can invest $1,000 in Startup B. If this startup succeeds, which happens with a probability of 10/100, she gets ten times her investment; otherwise, she loses her $1,000 investment. Eva is required to choose one of the two investments. Which would she prefer according to her expected utility
a) Eva would prefer Investment 1, and it's expected utility from investment 1 is approximately 127.97.
b) Eva would prefer Investment 1, and it's expected utility from investment 1 is approximately 137.97.
c) Eva would prefer Investment 2, and it's expected utility from investment 2 is approximately 121.98.
d) Eva would prefer Investment 2, and it's expected utility from investment 2 is approximately 131.98.