Question

A game consists of flipping two coins. If both coins turn up heads, you win $1.00. What is a "fair" price to play?(What is the expected value of one play?)

Answer 1

Answer:

Step-by-step explanation:

Given that a game consists of flipping two coins.  If both coins turn head, then there is a gain of 1 dollar.

Nothing mentioned about the fees for playing the game and hence we assumed that fee for playing the game is 0.  If both are not heads we can assume there is no gain.

Then we have outcomes as

(HH, HT, TH, TT)

Gain =(1,0,0,0)

Prob = (1/4, 1/4, 1/4, 1/4)

Hence expected value of the game

= gain * probability sum

= 1(1/4)+0(1/4)+0(1/4)+0(1/4)

=1/4

=0.25 dollars

Answer 2

It would be $0.50. Each Heads earns you $0.50 and if you pay $0.50  you have a chance of doubling your money.