Answer: The expected value of V can be calculated as the sum of the products of the possible values of V and their corresponding probabilities. Let's consider the three possible scenarios:
- V = 0 (with probability 0.2, as given in the problem)
- V > 0 but V < 10 (with probability 0.8 * (9/10), because if nobody gets sick, they will have at least 1 healthy vacation day, and if they have 1 healthy day, they can still have 9 more days of vacation)
- V = 10 (with probability 0.8 * (1/10), because if nobody gets sick, they can have all 10 days of vacation)
Using the utility function, we can see that the expected value of V is:
E[V] = 0 * 0.2 + (1/2) * (0.8 * 9/10) + 10 * (0.8 * 1/10)
E[V] = 0 + 0.36 + 0.8
E[V] = 1.16
Therefore, the expected value of V is 1.16. However, since V represents the number of healthy vacation days, it must be a non-negative integer. So, the closest integer to 1.16 is 1. Therefore, the answer is c. 2.