SOLUTION: In a casino game a player wins $500 with probability 0.01, wins $100 with probability 0.04, and loses $10 with probability 0.95. What is the expected value of the game from the pl

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Question 1100869: In a casino game a player wins $500 with probability 0.01, wins $100 with probability 0.04,
and loses $10 with probability 0.95. What is the expected value of the game from the player’s perspective? (Include the minus sign if the answer is negative.)
Answer by greenestamps(13216) About Me  (Show Source):
You can put this solution on YOUR website!

To find an expected value, multiply the probability of each possible outcome by the value of that outcome, and add all those products.

From the player's perspective, there is a .01 probability of winning $500, a .04 probability of winning $100, and a .95 probability of losing $10. The expected value is then
.01%28500%29%2B.04%28100%29%2B.95%28-10%29+=+5+%2B+4+-+9.5+=+-0.5

The expected value from the player's perspective is -$0.50.