Consider the Following Scenario When Answering the Following Questions

question 25

Multiple Choice

Consider the following scenario when answering the following questions:
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 million with a 100 percent probability.
Gamble B: The student will receive $5 million with a 51 percent probability,$10 million with a 25 percent probability,and $0 million (nothing) with a 24 percent probability.
-A risk-neutral student is

• A) likely to choose Gamble A because it has a higher expected value.
• B) likely to choose Gamble B because it has a higher expected value.
• C) likely to choose Gamble A because the student will win something (as opposed to nothing)with a higher probability.
• D) likely to choose Gamble B because the student will win something (as opposed to nothing)with a higher probability.
• E) indifferent toward Gambles A and B because they have the same expected value.