Engineering Board Exam Reviewer · Odds and Mathematical Expectation · medium
A spinner pays P0 with probability 0.5, P20 with probability 0.3, and P100 with probability 0.2. What is the fair price to play?
- P26
- P40
- P120
- P13
Answer
A. P26
Solution
The fair price equals the expected payoff: 0.5(0)+0.3(20)+0.2(100)=6+20=P26.
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