Suppose you are offered this opportunity: You can place a bet of $10 and someone else tosses a coin. You win an additional $15

Suppose you are offered this opportunity: You can place a bet of $10 and someone else tosses a coin. You win an additional $15 if heads occur, and you lose your $10 if tails occur What is the expected value of this game? Should you play?

Solutions

Expert Solution

Given:

Bet is of $10.00

If head occurs then additional winning of $15.00.

If tail occurs then losing $10.00.

We know

Probability of occurring head when tosses a coin = ½

Probability of occurring tail when tossing a coin = ½

Expected value of game = (1/2 × 15 – 1/2 × 10) $

= $ 2.5

Expected value of this game is $ 2.5.

I should play the game because our expected value if positive which means that chance of profit of money is more.

Expected value of this game is $ 2.5.

Junaid answered 1 year ago

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