The expected result for each shot is a loss of $ 12.50, so if 100 people played, Sophie would win on average about $ 1250. Lastly, Sophie should charge $ 5.77 for this value to be fair.
Since Sophie charges you $ 25 to get a chance to shoot at a target, and if you hit the bullseye, you get a $ 100 (win $ 75), and if you miss the bullseye but are within two circles of it, you get your money back, and over the course of sophies career, she finds that 5% of people hit the bullseye and 30% of people miss but are within two circles, while all other contestants miss by further and lose; to determine what is the expected amount for you to win or lose; how much money would you expect Sophie to win or lose if 100 people played the game; and what should she charge to make this game fair, the following calculations must be performed:
- (75 x 5 + -25 x 65) / 100 = X
- (375 - 1625) / 100 = X
- -1250 / 100 = X
- -12.5 = X
- 375 + 65X = 0
- 65X = 375
- X = 375/65
- X = 5.77
Therefore, the expected result for each shot is a loss of $ 12.50, so if 100 people played, Sophie would win on average about $ 1250. Lastly, Sophie should charge $ 5.77 for this value to be fair.
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