QUESTION 11 10 p If you are offered a Chance to play the following \'Lottery bas

Question

QUESTION 11 10 p If you are offered a Chance to play the following 'Lottery based on the tossing of a Coin -with payoffs given below. Heads you win $1000, Tails you lose $400 Lottery 50% Probability + S100C 50% Probability-$400 If you are Risk Neutral- What is the Expected Value of this Lottery should you Play it? +$300-Yes you should Play i $300- No you should Not Play it O +S600-Yes you should Play it +5700-No you should Not Play it Click Save and Submit to save and submit. Click Save All Ansuwers to save all answers Save All Answers Close Window MacBook Air 9 comm command

Explanation / Answer

Q 11. Expected value = x1 P(x1) + x2 P(x2)

=1000 * 0.5 + (-400) * 0.5

= 500 -200

=300

Thus, expected value of lottery is +300.

therfore, YES , you should play it

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