1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Karo-lina-s [1.5K]
3 years ago
9

Consider a simple example of moral hazard. Suppose that Woodrow goes into a casino to make one bet a day. The casino is very bas

ic; it has two bets: a safe bet and a risky bet. In the safe bet, a nickel is flipped. If the nickel lands on heads, Woodrow wins $ 100 . If it lands on tails, Woodrow loses $ 100 . The risky bet is similar: a silver dollar is flipped. If the silver dollar lands on heads, Woodrow wins $ 5,000 . If it lands on tails, Woodrow loses $ 10,000 . Each coin has a 50 % chance of landing on each side. What is the expected value of the safe bet?
Mathematics
1 answer:
Neko [114]3 years ago
6 0

Answer:

The expected value of the safe bet equal $0

Step-by-step explanation:

If  

S=\left\{s_1,s_2,...,s_n\right\}

is a finite numeric sample space and

P(X=s_k)=p_k for k=1, 2,..., n

is its probability distribution, then the expected value of the distribution is defined as

E(X)=s_1P(X=s_1)+s_2P(X=s_2)+...+s_nP(X=s_n)X)

What is the expected value of the safe bet?

In the safe bet we have only two possible outcomes: head or tail. Woodrow wins $100 with head and “wins” $-100 with tail So the sample space of incomes in one bet is

S = {100,-100}

Since the coin is supposed to be fair,  

P(X=100)=0.5

P(X=-100)=0.5

and the expected value is

E(X) = 100*0.5 - 100*0.5 = 0

You might be interested in
Find the x and y intercept for -2x-5y=30
Ahat [919]

Answer:

see below

Step-by-step explanation:

-2x-5y=30

To find the x intercept, set y =0 and solve for x

-2x-5*0=30

-2x = 30

Divide each side by -2

-2x/-2 = 30/-2

x =-15

To find the y intercept, set x =0 and solve for y

-2*0-5y=30

-5y = 30

Divide each side by -5

-5y/-5 = 30/-5

y = -6

3 0
3 years ago
Read 2 more answers
How should 48 eggs be divided so that the ratio is 4:3:5
dolphi86 [110]
Do 4+3+5 which = 12 
then do 48 divided by 12 which is 4 
Now 4 x 4 = 16 
3 x 4 = 12
5 x 4 = 20
16 + 12 + 20 = 48 so its divided as 16:12:20
5 0
3 years ago
POINTS PLZ HELP
Sunny_sXe [5.5K]

Answer:

G

Step-by-step explanation:

7 0
2 years ago
Read 2 more answers
Simplify the equation <br><br> ( -3x )^0 / 2<br><br> if possible please explain
nalin [4]

Hi


(-3x)^0/2

Simplify

= 1/2


I hope that's help !

5 0
3 years ago
Read 2 more answers
Please help I've been have trouble with it.
kakasveta [241]
It should be Answer D. I hope this helps. I also hope you have a great day!!!
3 0
2 years ago
Read 2 more answers
Other questions:
  • Please help!!
    14·2 answers
  • Steve, 18 years old, is three times as old as his brother Daniel. How old will Steve be when he will be twice as old as Daniel?
    11·1 answer
  • Will give brainliest answer
    7·2 answers
  • Find the circumference of a circle if the area is 300 square centimeters.
    14·2 answers
  • if a 12 sides regular polygon rotates about it’s center at which angle of rotation will the image of the polygon coincide with t
    11·2 answers
  • Solve the inequality: 5x + 14 greater than or equal too 54
    10·1 answer
  • 23 x 536 * Your answer​
    15·1 answer
  • Please help i’ll mark brainlest!!!!!
    6·1 answer
  • What's the value of 2 in 6,159.372
    11·2 answers
  • The safety officers of a mining company take an SRS of 500500500 employees and finds that 15\, percent of the sampled employees
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!