Answer:
The expected value of loss is -$0.5.
Step-by-step explanation:
Consider the provided information.
We need to select a four digit number between 0000 and 9999.
The two outcomes are either you lose $1 or you gain $4999.
If you bet $1 on 1234, then
The probability of losing is: [tex]\frac{9999}{10000}[/tex]
The probability of winning is: [tex]\frac{1}{10000}[/tex]
The expected value of gain or loss is:
[tex]EV=\sum P(x_i)\times X_i[/tex]
[tex]EV=-1\times\frac{9999}{10000}+4999\times\frac{1}{10000}[/tex]
[tex]EV=-0.9999+0.4999[/tex]
[tex]EV=-0.5[/tex]
Hence, the expected value of loss is -$0.5.
