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Suppose that a person won the lottery and was offered a choice of two prizes: (1) $400,000 or (2) a coin-toss gamble in which he
Suppose that a person won the lottery and was offered a choice of two prizes: (1) $400,000 or (2) a coin-toss gamble in which he or she would get $800,000 for heads and zero for tails.
a. What is the expected dollar return on the gamble?
b. Would the person most likely to choose the sure $400,000 or the gamble? Please explain
c. If she chooses the gamble, is the person a risk averter? Please explain.
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