Your bike is worth $100 and if you park it outside at school there is a 25% chance that it will be stolen. Your utility function for money is U = (M)2. Assume throughout that the bike value and money are interchangeable since you could sell the bike instantly at its value if necessary. What is the expected value of your bike?
What will be an ideal response?
Since there is a 75% chance that the bike will not be stolen, its expected value to you is $75.
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