Answer: The expected utility is 0.59.
Step-by-step explanation:
Since we have given that
[tex]U(c)=\sqrt{c}[/tex]
Probability that he will be injured = 0.1
Probability that he will not be injured = 0.9
If Billy is not injured this season, he will receive an income of 25 million dollars.
and
If he is injured, his income will be only 10,000 dollars.
According to question, the expected utility is given by
[tex]E[x]=0.9\times \sqrt{(0.01)}+0.1\times \sqrt{25}\\\\E[x]=0.9\times 0.1+0.1\times 5\\\\E[x]=0.09+0.5\\\\E[x]=0.59[/tex]
Hence, the expected utility is 0.59.
