Zack is an MIT student who lives in Harvard Square. Each
morning he takes the train or the bus to school. Riding the bus takes 5 minutes
with probability 1/4 and 20 minutes with probability 3/4. Riding the train
takes 7 minutes with probability 1/2 and 12 minutes with probability 1/2.a. (5 points) If Zack is risk neutral and only cares about minimizing
his travel time does he take the train or the bus? If he values his time at
$0.25 per minute how much more is he willing to pay for his preferred method
of transportation?b. (10 points) Assume Zack values his time at $0.25 per
minute. He can purchase an MBTA report each morning that tells what the actual
travel time will be for both the bus and the subway. How much is he willing to
pay for this information? (Travel times on the bus and subway are independent.)