Demand

Problem : Company A and Company B are both selling stock at $1 a share. If risk-neutral Kenny wants to buy stock in either Company A or Company B, and he thinks that the possible future values for Company A's stock are $0, $1, $5, and $20, with respective probabilities of 20%, 50%, 20%, and 10%, and that the possible future values of B's stock are $0, $1, $10, and $100, with respective probabilities of 50%, 30%, 15%, and 5%, which stock will he pick?

Problem : Which of the following are high risk investments, and which are low risk?

Gold
Stocks in new companies
IRA's
Savings bonds
Lottery tickets

Problem : What is the expected value of a stock whose possible future values are $0, $1, $10, and $60 with respective probabilities of 25%, 50%, 20%, and 5%?

Problem : If the current price of a stock is $7 a share, will risk-neutral Andy buy any stock if he believes that the possible future values are $0, $2, $5, $10, and $50, with respective probabilities of 10%, 15%, 50%, 20%, and 5%?

Problem : What is the maximum price that risk-neutral Tamara will be willing to pay for a stock which she believes has possible future values of $0, $5, $10, and $200, with respective probabilities of 50%, 25%, 24%, and 1%?