Question

topic: if someone asked you what you ahoulf be willing to pay for a chance to win $100 if on the next roll of a die a 3 came up, $50 if a 1,2, pr 6 came up, or $0 if a 4 or 5 came up. How would you approach figuring this out?

4-5 sentence minimum, do not copy and paste from other online resources. write in your own words do not attach a picture copy only text. once again must be written in your own words, and reply by text not by uploading a picture, no copying and pasting.

Answer 1

Let's assume this is a fair die

So probability of getting any number on the next roll = 1/6 Expected value won= Amount won*Probability

Now, 100 is won with probability 1/6 (on getting 3), 50 is won with probability 3/6 (on getting 1,2, or 6) and 0 is won with probability 2/6 (on getting 4 or 5)

So Expected value won = 100*1/6 + 50*3/6 + 0*2/6 = 250/6 ~ 41.67

So, you would be willing to pay a maximum amount of 41.67 or lower to play this game. (So that it's fair and the expected value of amount loss is not greater).