Where M denote money. Assume this individual has Rs4 with him. A lottery ticket that will be worth Rs 12 with probability half and zero otherwise is available in the market . What is the maximum price he would pay to obtain it?
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Explanation:
Currently, the person holds only 4 Rs and the lottery is worth Rs.12. Since, there is no other source of additional money explained in the question. It seems like the person can only pay 4 Rs for the lottery which is not equal to the worthy amount.
Hence, he will not be able to buy the lottery in the first place without additional amount of money because he should at least possess 12 Rs to buy lottery.
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