Reference no: EM133001805
Imagine a casino game where I roll a single dice. It costs nothing to enter this game. The payoff to participants is as follows:
-If the roll of the dice ends up on number "1" or "2", the payoff is $2000.
-If the roll of the dice ends up on number "3" or "4", the payoff is $7000.
-if the roll of the dice ends up on number "5" or "6", the payoff is $10,000.Assume that this is a "fair" dice. In other words, there is an equal probability of the roll being a 1, 2, 3, 4, 5 or 6.
Obviously, participants in this game will get some kind of payoff. It is just uncertain how big the payoff will be - it comes down to the roll of a dice.
Assume that you are a risk-neutral person, and were offered the opportunity to avoid playing this risky game and instead simply receive a fixed/certain payoff.
What is the smallest amount of certain payoff you would be prepared to take to avoid playing this risky game?
Do not enter a dollar sign ($) in your answer.
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