a.
To construct: A table of the
a.
Explanation of Solution
Given:
Probability of wining the game is 0.25.
Amount of bet is 1.
Payoff for the game is $3.
Calculation:
Here, payoff is given as 3. If the game is won the payoff leads the decrease in bet. That is,
Using the provided information, the probability distribution is:
X ($) | -1 | 2 |
Probability | 1-0.25 | 0.75 |
Thus, the probability distribution is:
X ($) | -1 | 2 |
Probability | 0.75 | 0.25 |
b.
To find: The expected value and interpret it
b.
Answer to Problem 9E
The expected value is
Explanation of Solution
Calculation:
The expected value can be calculated as:
The expected value is
The expected loss for each game is -0.25.
Chapter 6 Solutions
The Practice of Statistics for AP - 4th Edition
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