Question: Your current wealth level is M = 49 and you are forced to make the following wager: If a fair coin comes up heads, you

Your current wealth level is M = 49 and you are forced to make the following wager: If a fair coin comes up heads, you get $15; you lose $13 if it comes up tails. Your utility function is U = M.

(a) What is the expected value of this gamble?

(b) What is its expected utility?

(c) What is the most you would pay to get out of the gamble? (d) How would your answers change if the payoff for tails fell to a loss of $15?

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