Question

In a gambling game a man is paid $5 if he gets all heads or alltails when three coin are tossed, and he will pay out $3 if eitherone or two heads show.

a. Construct a probability distribution for this situation

b. What is his expected gain

Answer 1

Answer:

Total 8 outcomes

a) X: gain

X = +5 P(X = -5) = 2/8 = ¼

X = -3 P(X = -3) = ¾

b) E(X) = (5×¼) + (-3×¾l = -1

expected gain is -1

Which means expected loss is $1