What is the meaning of utility in this question? and how it could be calculated?
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Econimic Conditions
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Investment
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Good .6
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Bad .4
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Savings Bonds
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$1,000
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$ 1,000
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Real Estate
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10,000
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-2,000
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A young couple has $5,000 to invest in either savings bonds or a real estate deal. The expected return on each investment, given good and bad economic conditions, is shown in the following payoff table:
The expected value of investing in savings bonds is $1,000, and the expected value of the real estate investment is $5, 200.
However, the couple decides to invest in savings bonds. Explain the couple's decision in terms of the utility they might associate with each investment.