Question
Roulette wheels are typically marked with the numbers 1 through 36 plus 0 and 00. Each of these outcomes is equally likely every time the
Roulette wheels are typically marked with the numbers 1 through 36 plus 0 and 00. Each of these outcomes is equally likely every time the wheel is spun. If you place a bet on any one number and are correct, the payoff is 35:1, that is if you bet 1, you will receive 36 if you win (35 plus your original 1) and nothing if you lose. Suppose you place a 1 bet on your favourite number.
a) What is the casino's expected profit?
b) What is the standard deviation of this profit for a single bet?
c) Suppose 9 million bets are placed throughout the casino in a typical month. What is the standard deviation of the casino's average revenues per dollar each month? Hint: SD of independent, identical risks = SD (individual risk or single bet) / (number of observations or bets)1/2
d) If the 9 million bets are fully correlated (or a single bet of 9 million is placed) what is the possible loss to the casino
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Business Analytics Methods Models And Decisions
Authors: James R. Evans
2nd Edition
321997824, 978-1119298588, 978-0321997821
