Question

The world famous gambler from Philadelphia, Senor Rick, proposes the following game of chance. You roll a fair die. If you roll a 1, then Senor Rick pays you $25. If you roll a 2, Senor Rick pays you $5. If you roll a 3, you win nothing. If you roll a 4 or 5, you must pay Senor Rick $10, and if you roll a 6, you must pay Senor Rick $15. Is Senor Rick loco for proposing such a game? Explain.

Answer 1

Answer:

You lose $0.833 while Rick gains $0.833, and so Rick is not Loco

Step-by-step explanation:

There are six numbers on a dice. Thus, probability of rolling exactly one number = 1/6

Probability of rolling two is 2/6.

Rolling a 1 pays $25, and probability = 1/6

Rolling a 2 pays $5,and probability = 1/6

Rolling a 3 pays $0, and probability = 1/6

Rolling a 4 or 5 pays -$10, and probability = 2/6

Rolling a 6 pays -$15, and probability = 1/6

Thus,lets calculate the expected value;

EV = (25 × 1/6) + (5 × 1/6) + (0 × 1/6) + (-10 × 2/6) + (-15 × 1/6)

EV = - $0.833

This means you lose $0.833 while Rick gains $0.833, and so Rick is not Loco.