In a coin toss bet,where both heads and tails are equally likely,you win a dollar on heads but lose a dollar on tails.The expected value of the bet is
A)$0.50
B)-$0.50
C)$1.00
D)$0.00

Question

​In a coin toss bet,where both heads and tails are equally likely,you win a dollar on heads but lose a dollar on tails.The expected value of the bet is
A)​$0.50
B)-$0.50
C)$1.00
D)​$0.00

Quizplus · Accepted Answer

The expected value of the bet can be calculated as follows: 
E(X) = (1/2)($1) + (1/2)(-$1) 
E(X) = $0 
This means that, on average, you will neither win nor lose money in the long run. Therefore, the best choice is not to play the bet at all.

​In a Coin Toss Bet,where Both Heads and Tails Are

In a Coin Toss Bet,where Both Heads and Tails Are