<PRE><B>Question 436502</B>
Blue Chips and Red Chips A bag contains 3 blue chips and 2 red chips. Chi and Dolly play the following game. Chi selects one chip at random from the bag. If Chi selects a blue chip, Dolly gives Chi $5. If Chi selects a red chip, Chi gives Dolly $8.

    * a) Determine Chi’s expectation.
    * b) Determine Dolly’s expectation.
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Blue Chips and Red Chips A bag contains 3 blue chips and 2 red chips. Chi and Dolly play the following game. Chi selects one chip at random from the bag. If Chi selects a blue chip, Dolly gives Chi $5. If Chi selects a red chip, Chi gives Dolly $8.
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 Random gain values for Chi: 5, -8
 Corresponding Probabilities: 3/5, 2/5
good luck risky
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* a) Determine Chi’s expectation.
 E(x) = 5(3/5)-(8)(2/5) = 3-16/5 = -1/5 = -20 cents
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 * b) Determine Dolly’s expectation.
 Ans: +20 cents
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