Suppose Margaret behaves according to Expected Utility theory. That is, when faced with the gamble Win $x with probability p & win $y with probability q, she assigns a value p.u(x)+q.u(y) to that gamble.

Assume u(1000)=0 & existing wealth w=1000.

Margaret prefers $3000 for sure to the gamble ($4000,0.8; $0,0.2). Predict which one she will choose when she is offered the following 2 options: ($4000,0.2; $0,0.8) & ($3000,0.25; $0,0.75).