You are looking to buy a lottery ticket which has a probability of 40% to win $25 and a 60% probability to win $175. The lottery ticket will cost you $50 and you have a utility function defined as U(x) = (x) ) (ie utility of wealth is the square root of x).

a) What is the expected value of the lottery ticket?

b) What is your utility of purchasing the lottery ticket?

c) After purchasing the lottery ticket your friend offers to buy it from you, what is the least amount of money you would accept to sell it?

Answer rating: 100% (QA)

Lottery Ticket Analysis a Expected Value The expected value of an event is the average of the values ... View the full answer