Scenario: An unbiased coin is tossed, and if the outcome is heads, an individual wins $50. If the outcome is tails, the individual has to pay $50.
-Refer to the scenario above.If the rules of the gamble are changed such that in the case of heads,the individual wins $50,and in the case of tails,the individual loses $100,the expected value of the gamble changes to ________.

Question

Quizplus · Accepted Answer

The expected value for the original scenario is:
(0.5 x $50) + (0.5 x ‒$50) = $0
For the new scenario, the expected value is:
(0.5 x $50) + (0.5 x ‒$100) = ‒$25
Therefore, the best choice is B, which is ‒$25.

Scenario: an Unbiased Coin Is Tossed, and If the Outcome