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Calculate and mark the expected income of the lottery

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Reference no: EM132264263

Consider lottery A, where there is a x chance that you receive a payoff of $0 and a y chance that you receive a payoff of $400. Suppose that your utility function is U=√I.  

a) Draw this scenario. Calculate and mark the expected income of the lottery and the utility associated with that income.

b) Calculate the expected utility of the lottery  

c) Find the guaranteed income that will make you indifferent between the lottery and the guarantee. Mark this on your graph.

Reference no: EM132264263

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