You are watching the Inter Milan vs.Barcelona Champions League game with your best friend Joe.You make a deal with Joe:
If Barcelona wins,you walk away with $110.
If Inter Milan wins,you walk away with $50.
If you paid $100,what is your expected return assuming that each team has an equal probability of winning?
A) -0.21
B) -0.22
C) -0.20
D) -0.23
E) -0.24

Question

Quizplus · Accepted Answer

Expected return = E(k) = Pr₁k₁ + Pr₂k₂ + ... + Pr_nk_n Expected return (Barcelona wins) = 11ea7fdb_fc11_7817_a768_7b7e786b20fa_TB2902_11 - 1 = 0.10 Expected return (Milan wins) = 11ea7fdb_fc11_7818_a768_91a4e9cc9220_TB2902_11 - 1 = -0.50 Expected return = (0.5 × 0.1) + (0.5 × -0.5) Expected return = -0.2 or -20%

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