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I give you a dice and I have a coin. The game has three steps, each with a reward at the end that is determined
I give you a dice and I have a coin. The game has three steps, each with a reward at the end that is determined by your luck with the dice and mine with the coin. In step 1, you first roll the dice and then I flip my coin. The outcome of your dice is your reward that I pay you one year from now if the outcome of my coin flip is head. If coin is tail, you get nothing one year from now. In step 2, you roll the dice and if it is an even number, you get $6 in two years from now. If it is an odd number, you receive only $1. In step 3, I flip my coin twice and if the two outcomes are the same (both tail or both head), you receive $5 three years from now. If the two outcomes are different, you receive nothing three years from now. To play, you need to buy a ticket for $5 today. Assuming interest rate is 10%, what is NPV of playing this game for you? Hint: You just need to look at this game like a project that requires an initial investment (you need to buy a ticket) and brings you expected reward in each step the same way a project brings expected cash flows for a given year. Enter your answer without $ sign and with two decimals
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