You are offered a favorable bet on a coin toss,heads or tails.If you correctly call the result,you gain $20.If your call is incorrect,you lose $10.What is the expected value of information if you could perfectly predict the coin toss?
A)$5
B)$10
C)$15
D)$20
E)$25

Question

Quizplus · Accepted Answer

The expected value of perfect information is the difference between the expected value with perfect prediction and the expected value without it. With perfect prediction, you always win $20. Without prediction, the expected value is (0.5 * $20) + (0.5 * -$10) = $5. Thus, the expected value of perfect information is $20 - $5 = $15.

You Are Offered a Favorable Bet on a Coin Toss,heads