Adam, Brian, Chris are friends whose preferences over wealth, W, can be represented by the
utility functions: !(W) = W", #(W) = 2W, and $(W) = √W. All three friends are offered
the same lottery, , in which they can get wither $36 or $16. The probability of getting the highest
value is 20%. Consider the expected value, E(), and the variance, Var(), of lottery .
Which of the following alternatives is correct?
(a) E() = $20 and Var() = $64
(b) E() = $26 and Var() = $100
(c) E() = $10 and Var() = $36
(d) E() = $4.40 and Var() = $0.64