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During the course I talked about Thaler’s encounter with 23 executives. He asked them whether they...

During the course I talked about Thaler’s encounter with 23 executives. He asked them whether they would be willing to take a deal that gives them a 50% chance of making $2 Million and a 50% chance of losing $1 Million. Only three of the 23 executives were willing to take this deal. However, the CEO of the company was shocked by this because he didn’t look at these 23 deals in isolation but as a portfolio of 23 deals.

a)What is the expected profit/loss of the 23 deals taken together? (5 Points)

b)What is the probability of a loss taken the 23 deals together? (5 Points)

Math   Statistics-And-Probability   
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