0
$\begingroup$

I have a 2 sided fair penny, if I flip heads 4 times in a row I win 10 dollars but it costs 1 dollar to play, should I play the game?

Is the answer no because $(10/2^4)-1$ is negative? 

$\endgroup$
  • $\begingroup$ you are correct. $\endgroup$ – Matthew Daly Nov 8 at 16:40
0
$\begingroup$

Your win/lose analysis goes like this:

Win probability is (0.5)^4 and you'll have $10

Lose probability is 1-(0.5)^4 and it costs you $4

So your expected value goes like this:

(10*0.0625) + (-4*0.9375) = -3.125

To put it in plain English, you will lose, on average, $3.125 for every $4 you will invest so if you came with a $400 to play 100 games, you will likely to leave with $87.5.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.