You play a game where if the flip of a fair coin results in heads, you get $1,000; and nothing if it comes up tails. Answer each of the following questions:

a) What is the expected value of the game?

b) You’re offered $400 to not play the game. If you’re risk neutral (A=0) do you take the $400 or do you play the game? Why?

c) If you’re risk averse, what is the amount (specify amount using either <, >, =) you would need to be paid to NOT play the game?

d) If you’re risk seeking, what is the amount (specify $ amount using either <, >, =) you would need to be paid to NOT play the game?

e) If you’re risk neutral, what is the amount (specify $ amount using either <, >, =) you would need to be paid to NOT play the game?

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Flip of a fair coin results in heads : You play a game where if the flip of a fair coin results in heads, you get $1,000; and nothing if it comes up tails. What is the expected value of the game? You’re offered $400 to not play the game. If you’re risk neutral (A=0) do you take the $400 o.. |

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