Consider the Following Scenario to Answer the Questions That Follow

question 95

Multiple Choice

Consider the following scenario to answer the questions that follow.
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 $50 with a 70% probability and $100 with a 30% probability.
Gamble B: The student will receive $50 with a 50% probability, $200 with a 25% probability, and $0 (nothing) with a 25% probability.
-What is the expected value (EV) of Gamble A?

• A) $0
• B) $100
• C) $50
• D) $45
• E) $65

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Definitions:

Ultra Vires

Acts or decisions made by an entity that are beyond the powers conferred by its constitution, charter, or laws.

Lend Money

The act of giving money to another party with the expectation that it will be paid back, usually with interest, over time.

Good Faith

Acting with honesty and sincerity without any intention to defraud or seek unfair advantage.

Model Business Corporation Act

A set of model statutes prepared by the American Bar Association to provide a standard framework for the incorporation and governance of corporations in the United States.