Cameron is an investor trying to decide among the following three different investment options. Option A: Price today: $1000One year from today Cameron will receive one of the following payments$1,250 with a probability of 90%$1,000 with a probability of 8%$0 with a probability of 2%Option B:Price today: $1000One year from today Cameron will receive one of the following payments$4,000 with a probability of 30%$1,000 with a probability of 50%$0 with a probability of 20%Option C:Price today: $1000One year from today Cameron will receive one of the following payments$2,000 with a probability of 33%$1,000 with a probability of 34%$0 with a probability of 33%a. What is the expected value (payment) of each of the options at the end of the year?b. Which of the options has the highest risk? Why?c. If Cameron is a risk neutral inventor, which option will be selected?
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