A risk averse investor with utility function: u(w) = (w)1/2 where w represents wealth, He has $200 (wo) available to invest in the financial market. He has two alternatives. One is a risk-free asset...

Extracted text: A risk averse investor with utility function: u(w) = (w)1/2 where w represents wealth, He has $200 (wo) available to invest in the financial market. He has two alternatives. One is a risk-free asset with interest rate of r 2%; and the other alternative is to invest in a risky asset whose return is represented by a discrete probability distribution: (1%, 5%; 1/2, 1/2). %3D Consider the following two portfolios (P1 an P2): P1 consists in investing $50 in the risky asset, and P2 in investing $150 in the risky asset. Calculate the expected utility of every portfolio: Eu(P1) = (use two decimals) %3D Eu(P2) = (use two decimals). %3D Based on your calculations, the investor will prefer the portfolio (1/2]