What is expected value of the lottery and expected utility

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Reference no: EM131246417

Jenny's utility function is: U = √X (square route of x). She is faced with a lottery where she has a 50 percent chance of winning $121 and a 50 percent chance of winning $225.

a. What is the expected value of the lottery?

b. What is Jenny's expected utility?

c. Now Jenny is given the option to accept $169 for sure instead of participating in the lottery. Which will she choose? Why? (Possible answers: For sure payment, Lottery, Indifferent, Ambiguous)

Reference no: EM131246417

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