Gavin Jones S Friend Is Planning To Invest 1 Million In A Rock Concert To Be Hel

Gavin Jones’s friend is planning to invest $1 million in a rock concert tobe held 1 year from now. The friend figures that he will obtain $3 million revenue fromhis $1 million investment – unless, my goodness, it rains. If it rains, he will lose his entireinvestment. There is a 50% chance that it will rain on the day of the concert. Gavinsuggest that he buys rain insurance. He can buy one unit of insurance for $0.50, and thisunit pays $1 if it rains and nothing if it does not. He may purchase as many units as hewishes, up to $3 million.

 

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