Mean or Expected Value and Standard Deviation · Example 3
On May 11, 2013 at 9:30 PM, the probability that moderate seismic activity (one moderate earthquake) would occur in the next 48 hours in Iran was about 21.42%. Suppose you make a bet that a moderate earthquake will occur in Iran during this period. If you win the bet, you win $50. If you lose the bet, you pay $20. Let X = the amount of profit from a bet.
P(win) = P(one moderate earthquake will occur) = 21.42%
P(loss) = P(one moderate earthquake will not occur) = 100% – 21.42%
If you bet many times, will you come out ahead? Explain your answer in a complete sentence using numbers. What is the standard deviation of X? Construct a table similar to and to help you answer these questions.
OpenStax, Introductory Statistics 2e · §4.2 Mean or Expected Value and Standard Deviation · Example 3
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