suppose you won a Lottery and were offered (1) $ 0.5 million or a gamble in which you would get $ 1,000,000 if a head were flipped but zero if tail came up.

(i) What is the expected value of the gamble?

(i) If you choose the expected sum, are you a risk averter or risk seeker. Explain.

(i) Suppose you actually take the sure $ 500,000. you can invest it either a GK treasury bond that will return $ 537,500 at the end of year or common stock that has 50-50 chance of being either worthless worth $ 1,150,000 at the end of the year.

a) Determine the expected rate of return on the stock investment and indicate whether you would invest in the bond or stock.