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Old 10-22-2007, 03:52 PM
ItalianFX ItalianFX is offline
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Default Econ HW - Expected Value

For some reason this isn't making sense to me, so hopefully I can get the right answer here.

Question: What is the expected value of a random toss of a die? (Fair and six-sided.)

This next question I just have no idea how to do it.

Suppose your current wealth, M, is 100 and your utility function is U = M^2. You have a lottery ticket that pays $10 with a probability of 0.25 and $0 with a probability of 0.75. What is the minimum amount for which you would be willing to sell this ticket?

Thanks.
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