Suppose That,in an Experimental Setting,100 Students Are Asked to Choose

question 18

Multiple Choice

Suppose that,in an experimental setting,100 students are asked to choose between Gamble A and Gamble B,where: Gamble A: The student will receive $5,100 with a 70% probability and $200 with a 30% probability.
Gamble B: The student will receive $5,100 with a 50% probability,$200 with a 25% probability,and $0 (nothing) with a 25% probability.
What is the expected value of Gamble B?

• A)EV = 0.7 ($5,100)+ 0.3 ($200)
• B)EV = 0.5 ($5,100)+ 0.25 ($100)+ 0.25 ($25)
• C)EV = 0.5 ($5,100)+ 0.25 ($200)+ 0.25 ($25)
• D)EV = 0.5 ($5,100)+ 0.25 ($200)+ 0.25 ($0)
• E)EV = 0.5 ($2,600)+ 0.25 ($2,600)+ 0.25 ($0)

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Definitions:

Consideration

Something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.

Restrictive Covenants

Clauses within a contract that limit the actions of the parties, commonly used in employment and real estate agreements to restrict competition or usage.

Title Insurance Policies

Contracts that protect buyers and lenders from losses due to defects in a property's title.

Mortgagees

Lenders or financial institutions that provide funds for a mortgage loan, holding the property as collateral until the loan is repaid.