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Sagot :
Expected value of playing the game = $0.8
What is cost ?
- Cost denotes the amount of money that a company spends on the creation or production of goods or services.
- It does not include the markup for profit. From a seller's point of view, cost is the amount of money that is spent to produce a good or product.
Cost of playing = $2
Expected return
10% chance to win $1 = $1 10% = $0.1
25% chance to win back $2 = $2 25% = $0.5
50% chance to win $5 = $5 50% = $2.5
15% chance to lose $2 (being cost) = $2 15% = ($0.3)
= $0.1 + $0.5 + $2.5 - $0.3 = $2.8
Now for this we have to pay fixed cost $2
Thus, expected value of playing game = $2.8 - $2 = $0.8
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