What is the expected value of a coin toss game

simsek6li

simsek6li

Answered question

2022-02-13

What is the expected value of a coin toss game where you win $2 for each heads and lose $3 for each tails?

Answer & Explanation

bubble53zjr

bubble53zjr

Beginner2022-02-14Added 14 answers

The explanation below is based on the assumption that a fair coin is tossed.
Explanation:
When a fair coin is tossed, p(H)=12 and p(T)=12
For getting a head, the winning is $2 and for a tail, the loss is $3.
So X is a random variable that takes values 2 or -3.with probability 12 each.
The expected value is obtained as E(X)=2.123.12.
i.e. E(X)=0.5 or loss of $0.5

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