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If you throw exactly two heads in three tosses of a coin you win $7. If not, you pay me $9. Step 1 of 2 : Find the expected value of the proposition. Round your answer to two decimal places. Losses must be expressed as negative values.

Respuesta :

The expected loss = -$5

Explanation:

There are 4 cases

Winning amount given as per the question is = $7

If there is no win, then the amount that is needed to be paid = $9

Case Probability payoff

HH 0.25 7

HT 0.25 -9

TH 0.25 -9

TT 0.25 -9  

[tex]Expected value $=\sum$ probability $*$ payoff[/tex]

[tex]\text { Expected value }=0.25(7)+0.25(-9)+0.25(-9)+0.25(-9)[/tex]

[tex]Expected value $=1.75-6.75$[/tex]

[tex]Expected value $=5$[/tex]

Therefore, the expected loss = -$5

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