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Someone offers you a bet that gives you a 25% chance of winning $97 and a 75% chance of losing $40. If you are a
Someone offers you a bet that gives you a 25% chance of winning $97 and a 75% chance of losing $40. If you are a risk-neutral investor, the odds of winning would need to change to what number in order for you to be completely indifferent toward taking the bet?
Answer: 0.292
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Note from professor: Risk-neutrality means that you will be indifferent if the expected payoff from the bet is zero. Set up a math equation to solve for the probability of winning that makes the expected payoff equal to zero.
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