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What is the expected value of playing the game

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Reference no: EM132645485

You play a game that has the following payoffs:

35% probability of winning $1,000

35% probability of losing $1,500

30% probability of winning $550

Use the information above to answer the following questions:

a) What is the expected value of playing the game?

b) Would a risk neutral person play this game? Why or why not?

c) What level of risk tolerance (e.g. risk seeking, risk averse, risk neutral) must a person have to play this game?

d) How much in dollars, would a risk-averse and a risk neutral person need to be paid to play the game. Explain.

e) Which party has a positive risk premium for this game - the game's sponsor or the game's player? Explain.

Reference no: EM132645485

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