Answer:
a) -$3.03; b) The $5 on the number 25
Step-by-step explanation:
To find the expected value, multiply each probability by its value and then add them together.
The probability of making a profit of $20 is 3/38; this gives us
3/38(20) = 60/38
The probability of losing $5 is 35/38; this gives us
35/38(-5) = -175/38
Together, this gives us
60/38-175/38 = -115/38 ≈ $-3.03
b) Since the expected value for the $5 bet on a single number is $-0.53, and the expected value for the $5 on either 00, 0 or 1 is $-3.03, the better bet is on the number 25. The expected value loses less money with this option.
