Question: Donald has a boat worth $10000 and a utility function u(w) = w. He is planning to take a trip overseas. With a probability of

Donald has a boat worth $10000 and a utility function u(w) = w. He is planning to take a trip overseas. With a probability of 0.1, his boat will sink and it will cost $9100 to replace it. With a probability of 0.2, he will crack his boat, and it will cost him $1900 to fix it. With the remaining probability, he will have a safe trip and lose nothing. Which of the following is closest to his expected utility? a. 100 b. 95 c. 94 D. 91 e. 81 EU = 0.1 900 0.2 8100 0.7 10000 = 91

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