Frank Willis has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $25,000, he is ___.
A)a risk avoider
B)an optimist
C)a risk taker
D)risk neutral (an EMV'er)
E)a gambler

Question

Quizplus · Accepted Answer

Frank is risk neutral because he is willing to give up his right to enter the contest for a sure payment of $25,000, which is equal to the expected value of the contest.

Frank Willis Has the Right to Enter a Contest Where