3.) CHALLENGE: You discover a piece of art that you believe may be an original de Kooning, with 10%probability. If it is, it will be worth around $100mm. There is a 60% chance it was painted by a lesserexpressionist, and so would be worth $12mm. There is a 30% chance it was painted by an art student,and so would be worthless. How much should you pay for an option to buy the work for $10mm?(Adapted from a SIG Interview question)

The expected price of the art piece is $17.2mm Expectation of a random variable is sum of the…

Answered: 3.) CHALLENGE: You discover a piece of…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Similar questions

If the option will cost the investor an additional $10,000, should the investor purchase the option?
A game costs $2.00 to play. In the game, the player picks a card at random from a standard deck of cards. If the card is a face card, the player receives $6.00, if the card is not a face card, the player receives nothing.
A raffle has a grand prize of $15000 with the second prize of $900. If each ticket costs $2 and 9200 tickets are sold, what are the expected winnings for a ticket buyer? Express to at least three decimal place accuracy in dollar form (as opposed to cents).
Suppose that you and a friend are playing cards and decide to make a bet. If you draw two clubs in succession from a standard deck of 52 cards without replacing the first card, you win $⁢40. Otherwise, you pay your friend $⁢10. If the same bet was made 25 times, how much would you expect to win or lose? Round your answer to the nearest cent, if necessary. Win: Lose:
You pay $20 to enter a raffle. The first ticket drawn wins $1036, the second ticket drawn wins $477, the third through fifth win $186, and the sixth through tenth win $49. Suppose 2345 tickets were sold. What is the expected earning on your ticket?
A new game is being introduced at the Hard Rock Cafe. A ball is spun around a wheel until it comes to rest in one of many spots. Whatever is listed in that spot will be the player's winnings. If the wheel has 7 spots labeled $1, 9 spots labeled $2, and 6 spots labeled $10, how much should a player expect to win on average? Round to the nearest cent.
A and B throw a die for a stake of Rs.44,000, which is to be won by the player who first throws the number 5. If A takes the first throw, what are their expectations ?
Your friend makes up a game to play over Zoom during the shelter in place, and asks if you would like to play. The rules are: You win $8 if you roll a 6. You win $4 if you roll a 4 or 5 Otherwise, you have to pay $10. a. Complete the PDF Table. List the X values, where X is the profit, from smallest to largest. The first value is filled in for you. Round to 4 decimal places where appropriate. Probability Distribution Table X P(X) -10 b. Find the expected profit. $ (Round to the nearest cent)c. Interpret the expected value. You will win this much if you play a game. This is the most likely amount of money you will win. If you play many games, on average, you will likely win, or lose if negative, close to this amount.

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