Suppose a Family Has Saved Enough for a 10 Day

question 25

Multiple Choice

Suppose a family has saved enough for a 10 day vacation (the only one they will be able to take for 10 years) and has a utility function U = V^1/2 (where V is the number of healthy vacation days they experience) .Suppose they are not a particularly healthy family and the probability that someone will have a vacation ruining illness (V = 0) is 30%.What is the expected value of V?

• A)10
• B)7
• C)3
• D)0

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