Stephanie's Utility Function Is Given by U = W^1/2 where

question 85

Multiple Choice

Stephanie's utility function is given by U = W^1/2 where W is the value of her house. Her house is currently valued at $105,625. She knows that her house will be destroyed by a tornado with probability .10 this spring. If it is hit, the rubble will be worth $15,625. What is her expected utility?

• A)375
• B)355
• C)255
• D)305

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