A game pays t with probability 1/4 and 0 otherwise; entry fee is 2. Find expected net gain.
- Variance is nonnegative; variance of a sum includes covariance unless independence is justified.
Skills and prerequisite lessons
Working and explanation
BUILD THE REASONING
Hint 1
Hint 2
Worked solution
List the possible values and probabilities before computing moments.
Apply the stated relation and retain its conditions.
Expected net gain differs from the gross expected payment and is not a guaranteed outcome.
The requested value is 1.5.
Checks and common pitfalls: Expected net gain differs from the gross expected payment and is not a guaranteed outcome.
Think first. Reveal a hint when the class is ready.