Irene's Utility of Income Function Is U(I) = 20I

question 124

Essay

Irene's utility of income function is U(I) = 20I + 300. Irene is offered the following game of chance. The odds of winning are ¹/₁₀₀ and the pay-off is 75 times the wager. If she loses, she loses her wager amount. Calculate Irene's expected utility of the game.

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