EXERCISE #2: Assuming that you are a RISK TAKER,

For the following choose one of the 2 options by circling either a) or b). In addition calculate the expected value (EV) and briefly explain the logic of your choice.

a) $50,000

OR

b) 100 coin flips each of which has a

1. 50% chance of $800 (Heads)

2. 50% chance of $150 (Tails)

EV = $

NOTE: you should use the binomial calculator to assess the probability of the 100 coin flips exceeding $50,000. If you achieve 54 or more Heads you will exceed $50,000.