Question

In a new card game, you start with a well-shuffled full deck and draw 3 cards without replacement. If you draw 3 hearts, you win $50. If you draw 3 black cards, you win $25. For any other draws, you win nothing. (a) Create a probability model for the amount you win at this game, and find the expected winnings. Also compute the standard deviation of this distribution. (b) If the game costs $5 to play, what would be the expected value and standard deviation of the net profit (or loss)? (Hint: profit = winnings − cost; X − 5) (c) If the game costs $5 to play, should you play this game? Explain.

Answer 1

Answer:

Expected pay winning $50= $0.585

Expected pay winning $25= $2.36

Expected pay for anything else= $-4.35

Expected returns=3.59

Expected value for one play= $(-1.41)

Do not play this game because you will lose $1.41

Step-by-step explanation:

Probability P(3 hearts) = (13/52)×(12/51)×(11/50) = 0.013

Probability P(3black)= (26/52)×(24/51)×(23/50) = 0.118

Probability P(drawing anything else)= 1 - 0.013 - 0.118= 0.869

Expected pay($50)= 0.013$(50-5)= $ 0.585

Expected pay($25)= 0.118(25-5)$ = $2.36

Expected pay for anything else= 0.869(0-5)$ =$(-4.347)

Expected value of one play=$ (0.585 + 2.353 -4.347) = -$1.41

c) Do not play the game.