What is the expected value of the gamble


Question: Suppose you won the lottery and were offered a choice of either $500,000 in cash or a gamble in which you would get $1 million if a head were flipped but zero if a tail came up.

a) What is the expected value of the gamble?

b) Would you take the sure $500,000 or the gamble?

c) If you choose the sure $500,000, are you a risk averter or a risk seeker?

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Finance Basics: What is the expected value of the gamble
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