A game of chance offers the following odds and payoffs. Each play of the game co

Question

A game of chance offers the following odds and payoffs. Each play of the game costs $100, so the net profit per play is the payoff less $100.

a) What is the expected cash payoff?

b) What is the expected rate of return?

c) Caculate the variance of this rate of return. (Round your answer to the nearest whole number)

d) Calculate the standard deviation of this rate of return. (Round your answer to the nearest whole percent)

Explanation / Answer

a> Cash Pay off =0.2*500+0.4*100+0.4*0 140 b>Expected Return in amount=0.2*400+0.4*0+0.4*(-100) 40 Expected Rate of Return=(40/140)*100 28.57 c>Variance in Return=0.2*(400-40)^2+0.4*(0-40)^2+0.4*(-100-40)^2 34400 d>Standard Deviation=Square Root of 34400 185.47

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