Compute expected dollar return

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Reference no: EM1373032

Assume that a person won Florida lottery and was offered a choice of 2-prizes: (1) $500,000 or (2) a coin-toss gamble in which he or she would get $1 million if a head were flipped and zero if a tail.
a. What is the expected dollar return on the gamble?
b. Would the person choose the sure $500,000 or the gamble?
c. If he or she chooses the sure $500,000, is the person a risk averter or a risk seeker?

Reference no: EM1373032

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