Question

Suppose your cousin's Tooth Fairy leaves $1 one-third of the time, $0.50 one-third of the time, and $0.80 one-third of the time. What's the expected value of her Tooth Fairy payoff?

Answer 1

$0.767.

Explanation:

Total payoff = cash First time, p1 + cash second time, p2 + cash third time, p3

= ($1 * 1/3) + ($0.50 * 1/3) + ($0.80 * 1/3)

= 0.33 + 0.133 + 0.267

= $0.767.