A game of chance offers the following odds and payoffs. Each play of the game costs $125, so the net profit per play is the payoff less $125. Probability 0.20 0.40 0.40 Payoff $500 200 0 Net Profit $375 75 -125 a-1. What is the expected cash payoff? Note: Round your answer to the nearest whole dollar amount. a-2. What is the expected rate of return? Note: Enter your answer as a percent rounded to the nearest whole number. b-1. What is the variance of the expected returns? Note: In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number. b-2. What is the standard deviation of the expected returns? Note: Enter your answer as a percent rounded to 2 decimal places. a-1. Expected cash payoff a-2. Expected rate of return b-1. Variance b-2. Standard deviation % %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A game of chance offers the following odds and payoffs. Each play of the game costs $125, so the net profit per play is the payoff less
$125.
Probability
0.20
0.40
Payoff
$500
200
Net Profit
$375
75
0.40
0
-125
a-1. What is the expected cash payoff?
Note: Round your answer to the nearest whole dollar amount.
a-2. What is the expected rate of return?
Note: Enter your answer as a percent rounded to the nearest whole number.
b-1. What is the variance of the expected returns?
Note: In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate
calculations. Round your answer to the nearest whole number.
b-2. What is the standard deviation of the expected returns?
Note: Enter your answer as a percent rounded to 2 decimal places.
a-1. Expected cash payoff
a-2. Expected rate of return
b-1. Variance
b-2. Standard deviation
%
%
Transcribed Image Text:A game of chance offers the following odds and payoffs. Each play of the game costs $125, so the net profit per play is the payoff less $125. Probability 0.20 0.40 Payoff $500 200 Net Profit $375 75 0.40 0 -125 a-1. What is the expected cash payoff? Note: Round your answer to the nearest whole dollar amount. a-2. What is the expected rate of return? Note: Enter your answer as a percent rounded to the nearest whole number. b-1. What is the variance of the expected returns? Note: In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number. b-2. What is the standard deviation of the expected returns? Note: Enter your answer as a percent rounded to 2 decimal places. a-1. Expected cash payoff a-2. Expected rate of return b-1. Variance b-2. Standard deviation % %
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