Question

You have a biased coin that lands heads 10% of the time. You win $1000 every time the coin lands head and lose 50 every time the coin lands tails. You start with $0 it is possible to have ne ative balance 1 you throw the coin 100 times, what is: The maximum balance you could finish with? 2. The minimum balance you could finish with? 3. Your expected end balance? 100,000

Answer 1

1. Maximum balance = $100,000

2. Minimum balance = $(-5,000)

3. Expected balance = $55

Step-by-step explanation:

Data:

PW = Probability Win = 10% = 0.10

PL = Probability Lose = 100% - 10% = 90% = 0.90

WA = Winning Amount = $1,000

LA = Losing Amount = ($50)

L = Launchs = 100

Calculations:

1. Maximum balance = L x WA = 100 x $1,000 = $100,000

2. Minimum balance = L x LA = 100 x $(-50) = $(-5,000)

3. Expected balance = (PW x WA) + (PLxLA) = (0.10 x $1,000) + (0.90 x $(-50)) = $100 - $45 = $55

Hope this helps!