Problem
1. Many firms evaluate investment projects individually on the basis of expected value and at the same time maintain diversified holdings in order to reduce risk. Does this make sense in light of our discussion of risk attitudes in this chapter?
2. A friend of yours, who lives in Reno, has life insurance, homeowner's insurance, and automobile insurance and also regularly plays the quarter slot machines in the casinos. What kind of a utility function might explain this kind of behavior? How else might you explain such behavior?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.