Question 2Suppose that Jake considers two alternative investment plans of $1000

Question 2Suppose that Jake considers two alternative investment plans of $1000 for one-year. Investment A is a no-risk plan: deposit into a bank account with interest rates with 5%. That is it makes $1050 in a year for sure. Investment B is a risky plan: buying stocks. This plan could make $1500 in a year if the economy is good but if the economy is bad in a year it could make only $600. According to recent forecases by economists the probability that the economy is good in a year is 1/2.1. Find the expected income and standard deviation of Investment B. (3 points)Suppose Jakes utility function isU=I whereIis the income. Find the expected utility from each investment. (3 points)Which investment would Jake choose? Why?(2 points)Is Jake risk-loving? Explain why shortly. (2 points)(Bonus Questions) How much of certain income would he give up to avoid risk? (Hint: What is a certain income that yields the same utility as an uncertain income yields?) (4 points)