Norma is given a choice between a lottery ticket for lottery L and a fixed (riskless) amount of
money, R150. The lottery, L , pays out R100 with a probability of 0.2 and R1 000 with a
probability of 0.8 . Norma’s Von-Neumann Morgenstern utility function for money is
Ux =x / where x is the amount of money she receives.
15.1
is the expected monetary value (EMV) of L?
[1]
15.2
choice will Norma make? Show calculations.
[3]
