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Suppose you won the lottery and had two options: (1) recerving 50.2 million or (2) taking a garnble in which, at the flip of a

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Suppose you won the lottery and had two options: (1) recerving 50.2 million or (2) taking a garnble in which, at the flip of a coin, you receive 50.4 millioti if a heivd comes 4 but receive zero af a tail comes up. a. What is the expected value of the gamble? Enter your answer in millions, For example, an answer of $500,000 should be entered as 0,5 . Round your answer to one derimal nlara. 5 mullion b. Would vou take the sure 50.2 million or the namble? ci If you chose the sure $0.2 million, would that indicate that you are a risk averter or a risk seeker? d. Suppose the payolf was actually 50.2 million-that was the only choice. You now tace the choice of investing it in a U.5. Treasury bond that will retuin $211,000 at the end of a year of a common stock that has a 50.50 chance of being worthless or worth $460,000 at the end of the year. 1. The exbected orofit on the T-bond investment is $11,000. What is the expected dollar profit on the stock investment? Round your answer to the nearest dollar. 5 2. The expected rate of return on the T.bond investment is 5.5%. What is the expected rate of return on the stock investment? Round your answer to the nearest whole nuirahine. 3. Would vou invest in the bond of stock? 4. Exactly how targe would the expected profit (or the expected rate of return) have to be on the stock investment to make you invest in the stock, given the 5.5% retur on the hondi2 Round your answer to the nearest whole number. If no exact answer ean be obtained, enter 0. % 5. How might your decision be affected is, rather than buying one stock for $9.2 million, you could construct a portfolio consisting of 100 stocks with $2,000 invested in eoch7 Exch of these stocks has the same return characteristics as the one stock-that is, a 5050 chance of being worth zerb or $4,600 at year-end. 1. Investing in a portidio of stocks would definitely be a deterioration over investing in the single stock, If Investing in o pontfolio of stocks would definitely be an improvernent over investing in the single stock. IIt. The situation would be unchanged. Would the cottelation between returns on these stocks matter

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