The best alternative for maximax criterion is ___; this occurs with alternative States of Nature Alternatives S1 S2 Option 1 $10,000 $30,000 Option 2 $5,000 $45,000 Option 3 $-4,000 $60,000 A. $60,000; Option 3 B. 20,000; Option 1 C. $45,000; Option 2 D. $28,000; Option 3

Your company is starting a new r& d initiative: a development of a new drug that dramatically reduces the addiction to smoking. the expert team estimates the probability of developing the drug succesfully at 60% and a chance of losing the investment of 40%. if the project is successful, your company would earn profits (after deducting the investment) of 9,000 (thousand usd). if the development is unsuccessful, the whole investment will be lost -1,000 (thousand usd). your company's risk preference is given by the expected utility function: u(x) v1000 +x, where x is the monetary outcome of a project. calculate the expected profit of the project . calculate the expected utility of the project . find the certainty equivalent of this r& d initiative . find the risk premium of this r& d initiative e is the company risk-averse, risk-loving or risk-neutral? why do you think so?