Billy Has a Von Neumann-Morgenstern Utility Function U(c)= C^1/2

question 11

Multiple Choice

Billy has a von Neumann-Morgenstern utility function U(c) = c^1/2.If Billy is not injured this season, he will receive an income of 4 million dollars.If he is injured, his income will be only 10,000 dollars.The probability that he will be injured is .1 and the probability that he will not be injured is .9.His expected utility is

• A)3,620 dollars.
• B)1,810 dollars.
• C)between 3 and 4 million dollars.
• D)100,000 dollars.
• E)7,240 dollars.

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Definitions:

Pilgrims

Early settlers of the Plymouth Colony in present-day Massachusetts, known for their 1620 voyage aboard the Mayflower seeking religious freedom.

Cape Cod

A geographic cape extending into the Atlantic Ocean from the southeastern corner of mainland Massachusetts, in the northeastern United States.