You flip a fair coin ten times.Each time it comes up heads you get 10 cents.Each time it comes up tails you lose 5 cents.What is your expected value for each flip of the coin?
A) +10 cents
B) +5 cents
C) -5 cents
D) -10 cents

Question

Quizplus · Accepted Answer

The expected value can be calculated by taking the sum of the products of the probability of each outcome and the value associated with each outcome. In this case, the probability of getting heads is 0.5 and the associated value is 10 cents. The probability of getting tails is also 0.5 and the associated value is -5 cents. Hence, the expected value for each flip is:

(0.5 x 10) + (0.5 x -5) = 5 - 2.5 = 2.5 cents

Therefore, the best choice is B, as it is the closest option to the calculated expected value of 2.5 cents.

You Flip a Fair Coin Ten Times