Reply To: Financial Expectation2018-11-29T14:12:27+10:00

Maths Made Easy Forums Standard Probability & Relative Frequency Financial Expectation Reply To: Financial Expectation

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Keymaster
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It costs $12 to play a game. There is a probability of $$\frac14$$ of winning $40 and a probability of $$\frac38$$ of winning $25. Calculate the financial expectation of this game.

P(lose) = $$1-\frac14-\frac38=\frac38$$

E = $$\frac14\times\,$40+\frac38\times\,$25-\frac38\times\,$10-$12$$    (don’t forget to subtract the cost of playing the game)

= $3.625

∴ E = $3.63

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