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1. A lottery. Consider a lottery with three possible outcomes: $125 will be received with probability 0.2, $100 with probability 0.3, $50 with probability 0.5.

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1. A lottery. Consider a lottery with three possible outcomes: $125 will be received with probability 0.2, $100 with probability 0.3, $50 with probability 0.5. (a) What is the expected value of the lottery? (10 points) (b) What is the maximum amount a risk-neutral person would pay to play the lottery? (5 points)

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