Suppose you want to play a carnival game that costs 4 dollars each time you play

Question

Suppose you want to play a carnival game that costs 4 dollars each time you play. If you win, you get $100. The probability of winning is 3100. What is the expected value of the amount the carnival stands to gain?

a) 1.00

b) 0.90

c) 3.00

d) 1.20

e) 1.00

f) None of the above

Suppose you want to play a carnival game that costs 8 dollars each time you play. If you win, you get $100. The probability of winning is 1100. What is the expected value of the amount that you, the player, stand to gain?

a) 7.30

b) 6.70

c) 1.00

d) 7.00

e) 7.00

f) None of the above

Explanation / Answer

probabilty of losing a game =1-3/100=97/100

and valu given to player if he wins =prize money-ticket cost =96

hence expected value of carnival supposed to make =profit-lose =(97/100)*4-(3/100)*96= $1

option A is correct

expected value of player =(1/100)*92-(99/100)*8 =$-7

option e

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