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Bea Voh is UT football fan with current discretionary wealth of W = 250. Bea has the opportunity to make a $150 even-money bet
Bea Voh is UT football fan with current discretionary wealth of W = 250. Bea has the opportunity to make a $150 even-money bet on a UT victory over OU in this year's edition of the "Red River Rivalry". (An even-money bet means that Bea will gain $150 in the event of a UT victory but will lose $150 in the event of a UT loss. This is the only betting opportunity available to Bea.) Bea's utility function over certain levels of wealth is u (W) = W1/2 Finally, Bea believes that the probability of a UT victory over OU is 0.6 (which implies that she believes that the probability of a UT loss to OU is 0.4). What is the maximum amount that Bea would be willing to pay for the opportunity to make the bet?
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