1 Exercise: Gambling Consider the following gamble: throw a coin, get $ 5 if the head is up and lose $ 4 if the tail is up. (a) What is the expected gain of this gamble? Is it a fair gamble? (b) Judy has $ 20 in the pocket. Her utility function is given by u ( w ) = w 2 . Does she prefer entering the gamble or getting its expected gain for sure, in other words, is Judy risk-averse, risk-neutral or risk-inclined? What is the least amount of money you need to pay Judy to let her opt out of the gamble? (c) Sam has $ 20 in the pocket. His utility function is given by u ( w ) = w . Does he prefer entering the gamble or getting its expected gain for sure, in other words, is Sam risk-averse, risk-neutral or risk-inclined? (d) Sheila has $ 20 in the pocket. Her utility function is given by u ( w ) = w . Does she prefer entering the gamble or getting its expected gain for sure, in other words, is Sheila risk-averse, risk-neutral or risk-inclined