Problema Solution
Determine whether the following statement makes sense or does not make sense, and explain your reasoning.
Here's my dilemma, I can accept a $1200 bill or play a game ten times. For each roll of the single die, I win $600 for rolling 1 or 2; I win $500 for rolling 3; and I lose $300for rolling 4, 5, or 6. Based on the expected value, I should accept the $1200 bill.
Does this make sense?
Answer provided by our tutors
The expected value is:
E = (2/10)*600 + (1/10)*500 - (3/10)*300
E = $80
The expected value is $80, meaning you should accept the $1,200.