Answer to Question #275050 in Statistics and Probability for Kai

Question

A game of chance entails three coins. For each head that comes up, the player receives Ksh 1000 and loses Ksh 800 for any tail that comes up. To play the game, one pays Ksh 1500.

Advise a player whether it is advisable to play the game.

Answer 1

To answer that question we should calculate the expected player income. Let X be a random variable that represents the players inci=ome, then

$E(X)=-1500$(paying for playing)$+1000*0.5$(for head)$-800*0.5$(for tail)$=-1400$

That is more likely that player will lose the money, so it is better for him not to play a game.