Please answer all parts of the problem! 2) Suppose in a tournament with only thr

Question

Please answer all parts of the problem!

2) Suppose in a tournament with only three players left, first place receives

$5,000, second place receives $2,000, and third place receives $500. You have a 40% chance of winning first place, 35% chance of winning second place, and 25% chance of winning third place.

a)What would be your expected winningsin this tournament?

b)The tournament organizer gives you the option to continue playingor stop and split the prize money, proportional to your current standings. If you currently have $900 of the $2000 currently in play, how much would you win if you stopped playing and split the winnings?

c)Based on parts a and b, should you continue playing or stop and split the money? Why?

Explanation / Answer

a) E(x) = 0.4*5000+0.35*2000+0.25*500=2825

b) E(x)/Total=2825/[7500]=0.37666

We would win 37.66% of 2000 = 753.2 of the total if the game was as per the original tournamanet.

We would win if we stopped plying now.

c) We should continue playing

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