A classmate offers to play the following game: He will roll a 10-sided die; if it comes up between 1 and 9, he will pay you $10; if it comes up a 10, he will pay you $110.

a. If you are risk-neutral, and base all decisions on expected monetary value, what is the most you will pay to play this game?

b. Your classmate Risa has a utility function that depends on wealth. Specifically, U=W2. If Risa bases her decisions on expected utility, what is the most she would pay to play this game? What can you ascertain about Risa’s attitude toward risk?