6 o You must pick one of two wagers, for an outcome based on flipping a fair coi

Question

6 o You must pick one of two wagers, for an outcome based on flipping a fair coin. 1. You win $320 if it comes up heads and lose $80 if it comes up tails. 2. You win $560 if it comes up heads and lose $160 if it comes up tails. Find the expected outcome for each wager. Which wager is better in this sense? The expected outcome for the first wager is s (Type an integer or a decimal. Do not round.) The expected outcome for the second wager is Type an integer or a decimal. Do not round.) Which wager is better in this sense? The first wager The second wager O

Explanation / Answer

When a fai rcoin is tossed, probability of getting a head is

P(H) = 0.5

and probability of getting a tail is

P(T) = 0.5

(a)

Let X shows the amount winning by you.So for first wager expected value is

E(X) = 320* (0.5) - 80* 0.5 = 120

Answer: $120

Let X shows the amount winning by you.So for second wager expected value is

E(X) = 560* (0.5) - 160* 0.5 = 200

Answer: $200

Expected value of second wager is greater so it is better.

Answer: Second wager

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