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Steve Has Received a Stock Tip from Monica

Question 59

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Steve has received a stock tip from Monica. Monica has told him that XYZ Corp. will increase in value by 100%. Steve believes that Monica has a 25% chance of being correct. If Monica is incorrect, Steve expects the value of XYZ Corp. will fall by 50%. What is Steve's expected utility from buying $1,000 worth of XYZ Corp. stock? Steve's utility of income is Steve has received a stock tip from Monica. Monica has told him that XYZ Corp. will increase in value by 100%. Steve believes that Monica has a 25% chance of being correct. If Monica is incorrect, Steve expects the value of XYZ Corp. will fall by 50%. What is Steve's expected utility from buying $1,000 worth of XYZ Corp. stock? Steve's utility of income is Should Steve purchase the stock? Should Steve purchase the stock?

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