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

question 22

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

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