Question

You must pick one of two​ wagers, for an outcome based on flipping a fair coin.

1. You win ​$400 if it comes up heads and lose ​$100 if it comes up tails.

2. You win ​$700 if it comes up heads and lose ​$200 if it comes up tails.

Find the expected outcome for each wager. Which wager is better in this​ sense?

The expected outcome for the first wager is

​$....

​(Type an integer or a decimal. Do not​ round.)

The expected outcome for the second wager is

$....

​(Type an integer or a decimal. Do not​ round.)

Which wager is better in this​ sense?

The second wager

The first wager

Answer 1

The probability of a head on tossing of a coin is 0.5 and probability of a tail on tossing of a coin is 0.5

Question (1)

You win ​$400 if it comes up heads and lose ​$100 if it comes up tails

So Expected outcome = 400 * 0.5 - 100 * 0.5

= 200 - 50

= $150

The expected outcome for the first wager is he wins $150

Question (2)

You win ​$700 if it comes up heads and lose ​$200 if it comes up tails

So Expected outcome = 700 * 0.5 - 200 * 0.5

= 350 - 100

= $250

The expected outcome for the second wager is he wins $250

Question (3)

Since the expected outcome for the second wager is more than the expected outcome for the first wager, second wager is better in this sense

So Asnwer is second wager