Suppose that bookies face increased criminal penalties from

Suppose that bookies face increased criminal penalties from taking bets, and that as a result they demand an increase in their commission. Specifically, you now must wager $9 in order to win $7 when spread-betting. What is the highest probability you can win in your spread bets using a given strategy without violating strict efficiency of the betting market? Explain your answer/show your work. What is the highest probability you can win in your spread bets using a given strategy without violating weak efficiency of the betting market? Explain your answer/Show your work.

Solution

a)

probability will be 7/9 = 0.778