Question

Problem 5:

You play the following game and you start by investing $100. Two coins are flipped.

Head: you get starting balance +30%

Tail: you get starting balance -20%

Potential outcomes:

1-head+head: gain 60%

2-head + tail: gain 10%

3-tail +head: gain 10%.

4-Tail+tail: loose 40%.

*There is a 25% chance of making 60%, 50% chance of making 10% and 25% of losing 40%.

What are the variance and the standard deviation of this coin game?

Answer 1