I had an exam and did not know how to fully solve the below question... There...

I had an exam and did not know how to fully solve the below question...

There are two bets.

A coin is flipped and if its heads you win 10 million dollars, but if it is tails you lost 1 million dollars.

A die is rolled, and if it is 1 you receive 20 million dollars...if it is 2 you receive 10 million dollars, and numbers 3-6 you pay 600 thousand.

1. Find the expected return and std deviation of each. (which has a higher expected return/which is more risky)

2. Solve for the expected value and std deviation of the sum of those two bets.

3. Find the expected value and st deviation of 2 coin flips and 3 die rolls.

Solutions

Expert Solution

orchestra answered 1 year ago

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