# Question

Your current wealth level is M = 49 and you are forced to make the following wager: If a fair coin comes up heads, you get 15; you lose 13 if it comes up tails. Your utility function is U = √M.

a. What is the expected value of this gamble?

b. What is its expected utility?

c. How would your answers change if the payoff for tails fell to a loss of 15?

d. What is the most you would pay to get out of the gamble described in part (c)?

a. What is the expected value of this gamble?

b. What is its expected utility?

c. How would your answers change if the payoff for tails fell to a loss of 15?

d. What is the most you would pay to get out of the gamble described in part (c)?

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