Question
payoff probability 50 0.25 25 0.5 0 0.25 The table above provides a new gamble. Answer the following 4 questions based on the new gamble.
| payoff | probability |
|---|---|
| 50 | 0.25 |
| 25 | 0.5 |
| 0 | 0.25 |
The table above provides a new gamble. Answer the following 4 questions based on the new gamble.
a.What is the expected payoff of this gamble? Enter the numerical value only.
b.What is the variance of the gamble? Put down the numerical value using one decimal.
c.Suppose the person has a utility over amounts for sure equal to u(y) = square root of y. What is the expected utility of the gamble? Use three decimals in your numeric answer.
d.What is the amount for sure that would give the person the same expected utility as the gamble? Use two decimals in your numeric answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a The expected payoff of the gamble can be calculated by multiplying each payoff by its correspondin...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
