Problem 30 of 7
Compare strategies by expected value in Betting on horse A gives a 1 in 5 chance to win $100. Betting on horse B gives a 1 in 10 chance to win $200. Both bets cost $10.
Using a hint is okay. It just tells the trainer to give you a little more review.
Hidden until you reveal it.
compute long-run average return.
Hidden until you reveal it.
Compute or compare long-run average return for games, insurance, and investments.
Enter your answer
Your answer is equivalent to the expected form.
Walkthrough
Full solution stays hidden until you ask for it.
1. Compute expected value for each strategy if not already given.
2. Compare the expected values using the same units.
3. Recommend the strategy and state any relevant risk caveat.
Use the worked steps, then substitute the final answer back into the original relationship to confirm it satisfies the prompt.
Choosing the largest possible payoff without expected value.