You own a lottery ticket, which has a 1 percent chance (0.01) of winning $1,000.
Expected value from lottery ticket = 0.01(1000) + 0.99(0)
Expected value of lottery ticket = $10
A)
Expected value = $10
Offered value = $12
Since the individual prefered keeping the ticket having an expected value lower than the money offered in return, it means the individual is risk loving
B)
Expected value = $10
Money Jennifer would accept = $9
This means Jennifer is risk averse, as she prefers a sure shot money which is lower than the expected value of the lottery.
You own a lottery ticket, which has a 1 percent chance (0.01) of winning $1,000. Someone...
The chance of winning a lottery game is 1 in approximately 26 million. Suppose you buy a $1 lottery ticket in anticipation of winning the $4 million grand prize. Calculate your expected net winnings for this single ticket. Interpret the result. Find μ=E(x). μ=____________________(Round to the nearest hundredth as needed. Do not include the $ symbol in youranswer.)
Suppose a scratch-off lottery ticket cost $1, and has the potential for a $1,000 grand prize. You decide to buy one of these lottery tickets. Suppose that the random variable, X=Dollars Won, has the following probability distribution: x P(X=x) 1,000 .0001 10 1 .03 0 .95 a.) what is the probability that you will win $10? b.) how many dollars are you expected to win? c.) suppose your friend says," you will either win or loose with this ticket, that...
1. a. Two investors, A and B, are evaluating the same investment opportunity, which has an expected value of £100. The utility functions of A and B are ln(x) and x2, respectively. Which investor has a certainty equivalent higher than 100? Which investor requires the higher risk premium? b. (i) Describe suitable measures of risk for ‘loss-aversion’ and ‘risk aversion’. (ii) Concisely define the term ‘risk neutral’ with respect to a utility function u (w), where w is the realisation...