A game is played by drawing a single card from a regular deck of playing cards. If you get a black card, you win
nothing. If you get a diamond, you win $5.00. If you get a heart, you win $10.00. How much would you be willing
to pay if the game is to be fair? Explain.

Answer :

Answer:

[tex] A=5 *\frac{1}{4} +10 *\frac{1}{4} + 0 *\frac{1}{2}=\frac{5}{4} +\frac{10}{4}=\frac{15}{4}=3.75[/tex]

Step-by-step explanation:

Previous concepts

The expected value of a random variable X is the n-th moment about zero of a probability density function f(x) if X is continuous, or the weighted average for a discrete probability distribution, if X is discrete.

Solution to the problem

For this case we need to use the definition of expected value given by:

[tex] E(X) = \sum_{i=1}^n X_i P(X_i)[/tex]

For this case we need that the expected value would be 0 since we want a fair game.

Assuming a standard deck of 52 cards. We can find the probabilities for each possible event.

[tex] P(diamond) = 13/52=\frac{1}{4}[/tex]

[tex]P(heart) = 13/52=\frac{1}{4}[/tex]

[tex]P(black)= 26/52=\frac{1}{2}[/tex]

And we have the following values:

[tex] X_{diamond}= 5, X_{heart}=10, X_{black}=0[/tex]

Let A the amount that we need to pay for a game we have this equality:

[tex] 5 *\frac{1}{4} +10 *\frac{1}{4} + 0 *\frac{1}{2}-A=0[/tex]

And if we solve for A we got:

[tex] A=5 *\frac{1}{4} +10 *\frac{1}{4} + 0 *\frac{1}{2}=\frac{5}{4} +\frac{10}{4}=\frac{15}{4}=3.75[/tex]

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