John believes that the Democrat will be elected in a presidential election with probability 5/8. Mary believes
Fantastic news! We've Found the answer you've been seeking!
Question:
John believes that the Democrat will be elected in a presidential election with probability 5/8. Mary believes the Republican will be elected with probability 3/4. Neither gives third party candidates any chance at all. They agree to bet $10 on the outcome at even odds. (Thus John will pay Mary $10 if the Republican wins, and she will pay him $10 if the Democrat wins.)
1. What is John's expected dollar gain?
2. What is Mary's?
3. How would you be able to make money for sure by betting with John and Mary if they are both always ready to accept any bet that they believe has a nonnegative dollar expectation?
Related Book For
Management Accounting
ISBN: 9781760421144
7th Edition
Authors: Kim Langfield Smith, Helen Thorne, David Alan Smith, Ronald W. Hilton
Posted Date: