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Unformatted text preview: Individual Test is better c) N = 10, P = 0.25 1+10*(1-0.75 10 ) = 10.43 > 10 Individual Test is better d) Refer to set-up, any discussion similar is fine. 2. (Martingale System) a) Expected Monetary Gain (Profit) from making the bold bet = 1000*0.5 + (-1000)*0.5 = $0 EV= $0 0.5 0.5 +1000-1000 b) Cautious bet of $10 iii) Cautious bet of $100 b) Notice that any bet of the form has an expected profit of $0, which is why the above two trees all traces back to $0. Notice also that, for more cautious bets, the probability of winning is higher, but the amount of profit is lower (lower risk/value strategy for more risk-averse players) EV= $0 0.5 0.5 +X-X...
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- Spring '08
- Probability theory, Cautious bet