Homework SourseThere 16 spaces on a game board 4 prizes on within the 16 sp
There 16 spaces on a game board.
4 prizes on within the 16 spaces. They are as followed: $4000, $1500, $1000 and another $1000
In the remaining spaces (12), there is a bill of $50 that you owe if you pick it.
You have two choices: you can take $400 and walk away, OR take your chance and play the game for more money.
What are the odds and why?
There 16 spaces on a game board.
4 prizes on within the 16 spaces. They are as followed: $4000, $1500, $1000 and another $1000
In the remaining spaces (12), there is a bill of $50 that you owe if you pick it.
You have two choices: you can take $400 and walk away, OR take your chance and play the game for more money.
What are the odds and why?
4 prizes on within the 16 spaces. They are as followed: $4000, $1500, $1000 and another $1000
In the remaining spaces (12), there is a bill of $50 that you owe if you pick it.
You have two choices: you can take $400 and walk away, OR take your chance and play the game for more money.
What are the odds and why?
Solution
We will calculate the expected value of playing a game
Expected value = probability of event * prize or bill = 12/16*(-50) + 1/4(4000+1500+1000+1000) = 1875-37.5= 1825.5
