Question: A game of chance offers the following odds and payoffs. Each play of the game costs $200, so the net profit per play is the payoff less $200.
| Probability |
Payoff |
Net Profit |
| .20 |
$700 |
$500 |
| .40 |
200 |
0 |
| .40 |
0 |
-200 |
|
a-1. What is the expected cash payoff?
a-2. What is the expected rate of return?
b-1. What is the variance of the expected returns?
b-2. What is the standard deviation of the expected returns?