Consider the random variables x R and x B defined in the previous exercise. a. Suppose that
Question:
Consider the random variables xR and xB defined in the previous exercise.
a. Suppose that you are offered a choice of the following two games:
Game 1: Pay $7 to play, and you win y1 dollars, where y1 = xR + xB.
Game 2: Doesn’t cost anything to play initially, but you “win” 3y2 dollars, where y2 = xR + xB. If y2 is negative, you must pay that amount; if it is positive, you receive that amount.
For Game 1, the net amount won in a game is w1 = y1 - 7 = xR + xB - 7. What are the mean and standard deviation of w1?
b. For Game 2, the net amount won in a game is w2 = 3y2 = 3(xR - xB). What are the mean and standard deviation of w2?
c. Based on your answers to Parts (a) and (b), if you had to play, which game would you choose?
Explain your reasoning.
Step by Step Answer:
Introduction To Statistics And Data Analysis
ISBN: 9781337793612
6th Edition
Authors: Roxy Peck, Chris Olsen, Tom Short