A game of chance offers the following odds and payoffs. Each play of the game costs $100, so the net profit per play is the payoff less $100. Probability .10, .50 and .40. Payoff is $500, 100 and 0. net Profit is $400, 0 and -100. What are the expected cash payoff and expected rate of return? Calculate the variance and standard deviation of this rate of return.
Please refer attached file for better clarity of tables and missing formulas.
Expected Payoff and Return
Probability, P Payoff, C Return, R P*C P*R
0.10 500 400.00% 50 40.00%
0.50 100 ...
Solution describes the steps to calculate expected return, variance and standard deviation of return in the given case.