(Risk diversification on gambles) Still in Spartanburg, you encounter a second street hustler named Mary. Her game is more complicated: After you pay Mary $0.80, she throws a die. If the die comes up “1,” you pay Mary $2. If it comes up “2,” you pay nothing and win nothing. If it comes up “3,” “4,” “5,”

or “6,” Mary pays you $2.

a. What are the expected returns from playing this game?

b. What is the standard deviation of the returns?

c. Which game is riskier: Mary’s die throw or John’s coin toss (previous exercise)?

d. Which game would you prefer to play? Why?

e. What does this question has to do with investing in stocks?