You are considering investing $10,000 in a Large Cap index fund

You are considering investing $10,000 in a Large Cap index fund. Your financial planner told you that the chance you can earn a return of $2,000 (a 20% return) is 0.15, the chance you can earn a return of $1,000 (a 10% return) is 0.45, the chance you earn a return of $500 (a 5% return) is 0.25, and the chance you earn a return of $0 (a 0% return) is 0.15. Assume there are no costs for investing in this fund.

• What is the EV of this opportunity? (4 points)

 · Given that U(x) = Vx, what is the EU of this opportunity? (4 points)

 • Why is EU less than EV? (2 points)