Suppose you won the lottery and had the option of receiving (1) $0.5 m
QUESTION
Suppose you won the lottery and had the option of receiving (1) $0.5 million or (2) a gamble in which you would receive $1 million if a head were flipped but zero if a tail came up.a. What is the expected value of the gamble? Round your answer to two decimal places._________________________ millionS
Expected Value is the sum of all outcomes adjusted for probability. P(x)*x= E(x) a. The gamble is $0*(.5) $1mil*(.5)= $0.5mil. (the expected values are equal so you could really go either way and “expect” to be equally well off, but
usly if you get the $0, tough luck). b. The EV of the stock is $0*(.5) $1.15mil*(.5)= $575,000. choose the stock c. $75,000. d. net/invested=75000/500000= 15%
ANSWER:
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