Calculate the expected value, Basic Statistics

Imagine you are faced with the opportunity to play two coin flips, in which you get to call heads or tails prior to the flip of a fair, two-sided coin.  (That is, heads and tails have equal likelihoods of occurring on any given flip.)

In Game A, a correct call wins you $1000; for an incorrect call, you neither win nor lose money.  Game A costs $0 to play.In Game B, a correct call wins you $10,000; an incorrect call loses you $3,000.  Game B costs $0 to play.

a.  What is the expected value of each game?

b.  If you had to play one of the two games, which would you choose and why?  Please answer this as realistically as you can, given your (and/or your group members') actual preferences, wealth, risk aversion, etc.  Do not answer this question for some hypothetical person.  Imagine that you, yourself, have been given this actual choice and must now make a decision.

c.   At what cost of your preferred game would you be indifferent between the two games?  How did you arrive at this number?

 

Posted Date: 2/16/2013 7:55:58 AM | Location : United States







Related Discussions:- Calculate the expected value, Assignment Help, Ask Question on Calculate the expected value, Get Answer, Expert's Help, Calculate the expected value Discussions

Write discussion on Calculate the expected value
Your posts are moderated
Related Questions
How do I calculate the temperature change of a sample?



Discovery of Neutron A neutron is a neutral particle carrying no charge, and having mass equal roughly to the mass of a proton. This particle was discovered experimentally by Chad

The fund statements for gorvernmental funds should include a? A. Balance sheet for governmental funds. B. Statement of revenues,expenses, and changes in fund net assets. C.Statemen

Define Allocate To split a lump-sum appropriation into parts that are specific for expenses by particular government models and/or for particular requirements, actions, or things.

Ritu acquired a mine on lease from Richa for a period of 8 years at a royalty of ` 60 per tonne of coal produced subject to minimum rent of ` 1,00,000 for the first year, increasin

A machine that fills quart milk cartons is set up to average 32.2 oz per carton, with a standard deviation of 1.2 oz. Assume a normal distribution for all of the cartons filled, wh

.A study of long term phone calls made from general electricss corporate headquarters in fairfeild, conneticuit, revealed the length of the calls, in minutes follows the normal pro