Asked by Brandon Kasyoki on Sep 24, 2024
Verified
In a coin toss bet,where both heads and tails are equally likely,you win a dollar on heads but lose a dollar on tails.The expected value of the bet is
A) $0.50
B) -$0.50
C) $1.00
D) $0.00
Coin Toss
A random method of deciding between two alternatives by flipping a coin and observing which side lands facing up.
Expected Value
A calculated average of all possible values of a random variable, weighted by their probabilities.
- Learn the concept of expected value and the method for determining it in uncomplicated scenarios.
- Distinguish between fair and unfair games based on the expected value principle.
Verified Answer
AW
Ashley Wilcoxabout 22 hours ago
Final Answer :
D
Explanation :
The expected value of the bet can be calculated as follows:
E(X) = (1/2)($1) + (1/2)(-$1)
E(X) = $0
This means that, on average, you will neither win nor lose money in the long run. Therefore, the best choice is not to play the bet at all.
E(X) = (1/2)($1) + (1/2)(-$1)
E(X) = $0
This means that, on average, you will neither win nor lose money in the long run. Therefore, the best choice is not to play the bet at all.
Learning Objectives
- Learn the concept of expected value and the method for determining it in uncomplicated scenarios.
- Distinguish between fair and unfair games based on the expected value principle.