What is your expected value for a game where your probability of winning is 1/9 and your profit is four times your wager?

Question

Mathematics

Javier Hess

21 June, 05:35

What is your expected value for a game where your probability of winning is 1/9 and your profit is four times your wager?

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Answers (1)

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Tommy Simon · Answer 1

Suppose you wager x amount. There are two possibilities: winning 4x (probability 1/9), or losing x (probability 8/9). The expected value for your winnings is thus:

8/9 * (-x) + (1/9) * (4x) = - 4/9 x.