Find the y-intercept of the line on the graph. Enter the correct answer.
2 answers:
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Answer:
- Expected Value= -$7
- Bill should not play the game
Step-by-step explanation:
In the game, these are the payout:
- 30% of the time you will lose 20 dollars.
- 20% of the time you lose 40 dollars.
- 10% of the time you win 50 dollars
- 40% of the time you win 5 dollars.
To compute the expected value, take note that a loss is negative while a win is positive.
Therefore:
E(X)=(-20*0.3)+(-40*0.2)+(50*0.1)+(5*0.4)
E(X)=-7
- The expected value of the event is -$7.
- Based on the negative expectation, Bill should not play this game as he is expected to incur a loss.