Question

A) Option C is a coin toss that pays 2 dollars for tails and 5 dollars for heads. Option D is a dice roll that pays the same amount shown on the dice. Each play cost three dollars to play. What is the expected value, variance and standard deviation of the profit for each option?

B) What happens if we spend 6 dollars to double down on option C, double on option D, or buy option C and D once each? What will the expected value, variance and standard deviation of your profit?

C) In this case we suppose that the dice and coin are linked to each other. The coin is always heads when the dice roll is even and tails when the dice is odd. What is the covariance and correlation of the coin and dice profits? If I buy both the coin and the dice, are the expected value, variance, and standard deviation of profit the same as in the last problem?

Answer 1