Maya's bracelet is worth $100. There is a 25% chance that it will be stolen from the locker room at the gym. Maya's utility function for money is U(W)= W². The expected value of Maya's bracelet is: A)75. B)175. C)150. D)100.

Question

Quizplus · Accepted Answer

The expected value of Maya's bracelet, given a 25% chance of being stolen, is calculated by taking the value of the bracelet and subtracting the product of the probability of it being stolen and its value. This is $100 - (0.25 \times 100) = 100 - 25 = 75$.

Maya's Bracelet Is Worth $100