Answered: 1. The expected value of a gamble…

Ciccarelli: Psychology_5 (5th Edition)

5th Edition

ISBN:9780134477961

Author:Saundra K. Ciccarelli, J. Noland White

Publisher:Saundra K. Ciccarelli, J. Noland White

Chapter1: The Science Of Psychology

Section: Chapter Questions

Problem 1TY

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1. The expected value of a gamble Jacques and Kyoko are friends who are attending a “casino night” at a charity fundraiser. Once inside, there's a table at which you can gamble. For $10, you can flip a coin. If it comes up heads, you get $15 back, for a gain of $5. If it comes up tails, you get $5 back, for a loss of -$5. For all parts of this question, assume that, if you are indifferent between taking the gamble and not taking it, you will take the gamble. This game is . Suppose Kyoko decides not to take the gamble. Can you conclude from this that she is risk neutral? Yes No Suppose Jacques decides to take the gamble. Suppose a different table offers another $10 coin flip where heads pays $25 and tails pays $0. Can you conclude that he would also accept this gamble? Yes No

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