Suppose That,in an Experimental Setting,100 Students Are Presented with Two

question 6

Essay

Suppose that,in an experimental setting,100 students are presented with two situations involving risk and return.The students are first asked to choose between Gamble A and Gamble B,where:
Gamble A: The student will receive $1 million with a 100% probability.
Gamble B: The student will receive $1 million with an 89% probability,$5 million with a 10% probability,and $0 million (nothing)with a 1% probability.
Explain the process of finding the expected values of Gambles A and B.Which option would a risk-neutral student choose? Why?

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Definitions:

Storge

Solid love found in friendships and family, based on trust and caring.

Ludus

Game-playing love based on the enjoyment of another.

Pragma

Practical love based on mutual benefits.

Storge

A term referring to love that is based on friendship, familial bonds, and familiarity, rather than romantic or physical attraction.