Question: 5 EX: Suppose Ho's utility function is ()= 2.Suppose he has the opportunity to play this gamble: - A 1/5 chance of winning $25 and

5

EX: Suppose Ho's utility function is ()= 2.Suppose he has the opportunity to play this gamble:

- A 1/5 chance of winning $25 and a 4/5 chance of winning $1. 1.

What is the expected value of the gamble?

What is Ho's expected utility of the gamble?

What is Ho's utility of the expected value of the gamble? Which is bigger: this, or his expected utility?

His expected utility is bigger 4. What is Ho's risk attitude?

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