Bea Voh is UT football fan with current discretionary wealth of W = 250. Bea has...

 

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Bea Voh is UT football fan with current discretionary wealth of W = 250. Bea has the opportunity to make a $150 even-money bet on a UT victory over OU in this year's edition of the "Red River Rivalry". (An even-money bet means that Bea will gain $150 in the event of a UT victory but will lose $150 in the event of a UT loss. This is the only betting opportunity available to Bea.) Bea's utility function over certain levels of wealth is u (W) = W1/2 Finally, Bea believes that the probability of a UT victory over OU is 0.6 (which implies that she believes that the probability of a UT loss to OU is 0.4). What is the maximum amount that Bea would be willing to pay for the opportunity to make the bet? Bea Voh is UT football fan with current discretionary wealth of W = 250. Bea has the opportunity to make a $150 even-money bet on a UT victory over OU in this year's edition of the "Red River Rivalry". (An even-money bet means that Bea will gain $150 in the event of a UT victory but will lose $150 in the event of a UT loss. This is the only betting opportunity available to Bea.) Bea's utility function over certain levels of wealth is u (W) = W1/2 Finally, Bea believes that the probability of a UT victory over OU is 0.6 (which implies that she believes that the probability of a UT loss to OU is 0.4). What is the maximum amount that Bea would be willing to pay for the opportunity to make the bet?

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