Bob is offered the following wager by Nabob. For a payment of $20, Bob can flip five fair coins. If Bob flips three or more heads he wins $100, otherwise he loses $100. The expected value of this wager is:
A) $0.
B) $40.
C) $60.
D) $80.
E) $100.

Question

Quizplus · Accepted Answer

The expected value is calculated by considering the probabilities of winning and losing. The probability of getting 3 or more heads in 5 flips of a fair coin is 0.5. The expected value is (0.5 * $100) + (0.5 * -$100) = $0.

Bob Is Offered the Following Wager by Nabob