Which of the following chances has the biggest expected return?
A) a 100% chance of getting $1,000
B) a 50% chance of winning $2,000 and a 50% chance of winning $0
C) a 50% chance of winning $2,000, 25% chance of winning $4,000 and a 25% chance of losing $4,000
D) All of the above have the same expected return.

Question

Quizplus · Accepted Answer

The expected return for each option is calculated as follows: A) 100% of $1,000 = $1,000. B) 50% of $2,000 + 50% of $0 = $1,000. C) 50% of $2,000 + 25% of $4,000 - 25% of $4,000 = $1,000 + $1,000 - $1,000 = $1,000. Thus, all options have the same expected return of $1,000.

Which of the Following Chances Has the Biggest Expected Return